How India created the Offshore Outsourcing Industry

Outsourcing Industry

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The concept of outsourcing has been around for a long time, but it was not until the 80s and 90s that advances and improvements in technology made it a viable option for businesses around the world. Initially only available to the biggest multinationals who would offshore functions to facilities they owned and managed, it has developed to offer almost any function imaginable to businesses large and small. The global outsourcing sector is worth nearly $100 billion every year and has changed beyond recognition from the industrial-scale call centres in India that were a feature of the early days.

The earliest examples of outsourcing were dominated by cost. Businesses saw a significant advantage in using destinations with a low labour cost to host non-core business processes. India emerged as an early leader and remained a dominant player because it offered a large English-speaking population available for hire at rates that were significantly lower than demand in the UK and US. Although these outsourced services frequently had problems — the rates of pay were often too low to attract the most fluent staff, creating communication problems — they were enough to prove the concept. It was both technically possible and financially viable to offshore large corporate functions.

The Indian outsourcing industry has flourished ever since. Within a few years of the first in-house or captive operations being established, some of the more entrepreneurial employees took their skills and experience and established the first third-party outsourcing providers. These pioneers lit the fuse on the explosive growth of outsourcing.

By providing a third-party option, outsourcing providers were able to make it an option for significantly smaller companies. Now, to offshore outsource didn’t require significant resources, establish and staff facilities, or create the ongoing headache of management. Instead, it was a case of establishing the requirements, negotiating the cost, and letting an expert company deliver the outsourced services.

And it was not long until other countries recognised the opportunities. Outsourcing to the Philippines has emerged as a world leader after following India’s model to encourage investment in the nation. And countries like India and the Philippines recognise the value that outsourcing services bring to the country, eager to get a share of the global market and support employment for millions of their citizens.

The outsourcing sector shows every sign of continuing to grow. With consumers becoming increasingly demanding and businesses keen to focus on their core products, outsourcing has been the solution for businesses looking to keep their prices low and profits healthy. And the outsourcing industry has responded by becoming increasingly innovative. While call centres may remain the staple, places like India have used their natural advantages to further expand the market; for example, India now has a strong reputation for IT and coding outsourcing.

India pioneered outsourcing and, in doing so, created a global industry. They remain a dominant region in the sector, but, increasingly, other nations are starting to challenge that dominance as they seek to offer more and better services. And in that environment of competition, it’s the businesses doing the outsourcing and their customers who are the real winners.

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