IT, BT and now communications – Current Outsourcing Trends in India (Chillibreeze – 2007)

With India exceeding global expectations, it has become a ‘subject of research’ amongst global counterparts and a viable case study. Lawrence Summers, President of Harvard University, once said, ‘Like people study political science, culture, public health, economics, law and medicine, students in Harvard will now study India as a subject.’

Today, other parts of the world see India as a lucrative destination to do business; positioned as a hub for profitable outsourcing. As the industry has matured, organizations now perceive India as a global Knowledge Process Outsourcing (KPO) hub not merely for cost benefits but due to talent availability, competitive results, technology expertise and innovation. In this regard, India has witnessed progress across industries growing exponentially with the outsourcing trend, beginning with IT heading towards BT and now new found industries like communications amongst others.

IT outsourcing to India, which began in the 1990’s was the sunshine sector promoting the Country’s value globally. As a talent rich Country with mushrooming engineering colleges, India is the preferred choice for software outsourcing. What began as merely a data entry job; today involves complex turnkey projects that are being outsourced.

According to NASSCOM, the Indian IT and Business Process Outsourcing sector has grown at 30.7% as compared to the estimate of 27% in 2006-07. For the current year, NASSCOM predicts the sector to touch $50 Bn. (USD) though the growth rate may experience a slowdown to 24 -27%. The Government’s support in this sector with a progressive IT policy has resulted in a boom.

Over the years, as confidence has built up amongst the global audience towards the sector, security issues owing to data theft in private firms in India have been raised. The outsourcing trend was being questioned with regard to India’s potential when employees were involved with data leakage and money laundering with large wire transfers. This not only raised questions about the credibility of the Indian outsourcing market but about the industry as a whole. With the host of benefits the trend has offered growing global businesses like cost benefits, talent availability, domain expertise, government support amongst others, it was not long before the wave of doubt disappeared and the industry continued its positive momentum.

Now as the industry continues to develop, the IT outsourcing boundaries encompass novel avenues. Increasingly potential buyers are viewing this lucrative opportunity with added complexity and hence pursue specialized vendors rather than broad based vendors. Industry experts predict that the industry needs to strengthen few key aspects like talent supply, data security, an innovative ecosystem, better regulatory support amongst others. Another short term hurdle to be tackled is the rupee appreciation, which has a strong influence on the sector.
In close competition with IT has been the sector of biotechnology, which is predicted to be the next big thing for India. With the country being known as the hub for technology, innovation and talent, the biotechnology industry as assessed by ABLE (Association of Biotechnology Led Enterprises – the nodal body for the industry), has had another positive year in 2005-06 with sales growth of 37.42% to reach Rs. 6, 251 crores ($1.45 billion) in revenues. The industry narrowly missed the $ 1.5 billion mark by just $ 50 million (Rs. 225 crores) though BioPharma alone crossed the $1 bn mark.

Under the umbrella of biotechnology, India has found specialists in various areas of the field like BioPharma, BioAgri, BioServices, BioIndustry and BioInformatics amongst others. While all sectors witnessed growth, the BioAgri sector was the fastest growing. With India’s growing value in research, this sector has leveraged its expertise as a global KPO hub with the largest company being Serum Institute of India while Biocon is the largest Group in India in Biotech. Also as per the ABLE survey the top 20 homegrown companies are the ones who contributed to 48.45% of the total business in the sector.

Today, as the biotechnology industry is mushrooming with global counterparts focusing on India; there are other avenues in research that have taken prominence. The areas of clinical research for the pharma industry have also grown manifold with dominating benefits. The pharma industry demands, that for a drug to be introduced into the market, it must undergo various stages of clinical trials and must be tested on multiple patient populations. Therefore apart from global regulatory requirements, the segment benefits in India include cost advantage, availability of a large pool of treatment naïve patients giving a multiethnic and multiracial base, speed of the development process, spectrum of diseases, trained manpower (investigators) amongst others. In this area, Mc Kinsey has estimated that by 2010, global pharma majors would spend around $1-1.5 bn for drug trials in India.

Pharma majors are also attracted to India owing to the magnitude of specialty hospitals, medical colleges and English speaking personnel. Initially international majors had doubts about the regulatory approval process as a possible barrier for the development in India, but now organizations have taken keen interest and have deployed specialized teams for the same. In addition, global regulators like FDA have also undertaken visits and approvals in certain areas, thereby instilling added confidence to clients worldwide.

Hence with IT and BT gaining their share of the pie, another page has opened with the field of communications including content and writing services, that is gradually enhancing India’s position. With the effective use of technology, users and companies have found it useful to position this industry as a business. Now companies and individuals in the US, UK and other geographic locations have realized the capability of the English speaking Indian people and are able to leverage such services. The proficiency of the language with accuracy and completeness of knowledge in specific domains has enabled Indians to provide services in content writing.

Further, cost benefits are always appreciated. Today several online portals offer the option of bidding for projects on content and then undertaking projects. There are other portals which welcome writing services from individuals on varied topics and assure payments on the articles generated and quality provided. Content writing in India was previously restricted to the role of technical writing i.e. writing on product specifications etc, but now the definitions have expanded and avenues of writing have increased. According to Express India, big organizations like NIIT, Genpact, TIS, TCS, Lionbridge, have flagged off operations in this area. Today the industry of content writing is the highest employer in the outsourcing industry.

In the area of communications, there is also a new trend for large MNC’s to outsource their communication services including branding and marketing communications, with small outfits in India, as the primary contact. This gives the Indian outfit the responsibility to handle all PR, advertising, direct marketing, sales promotions and other services for not just India, but all their offices in different global markets. This positions the Indian outfit as the one stop shop for the company. This is usually a conscious decision by the management in the corporate head quarters and is generally taken after the MNC has worked with the Indian outfit for a select period of time and has established a consistent relationship with the Indian partners.

As the potential for outsourcing increase, it is imperative for India to capitalize on new opportunities and be innovative in existing services. This was well summarized in the words of Lily Taylor, “Doors of opportunity don't open, they unlock; it is up to you to turn the knob.” While experts will continue to assess the potential in new found industries, new avenues like legal outsourcing to India has also emerged as a new trend. As the benefits of this new module will be enriching for the Country, other avenues will grow in optimism for their share of the outsourcing pie. The competition is not merely between countries like India, China, Philippines, Malaysia, Vietnam, Brazil, Russia, Singapore, South Africa, and Australia on the provision of outsourced services. Instead, industry sectors within one country are identifying differentiators to make their sector as the ‘sunshine sector’. It is critical for all sectors to work in tandem in order to position the Country as ‘an indispensable factor’ in the outsourcing world.

Deepti Belliappa Ganapathy

Chillibreeze 2007