13 / 62
OUTSOURCING: HERE TO STAY
The business process outsourcing (BPO) sector has flourished
particularly in India and the Philippines on the heels of an
increasing global trend towards outsourcing as firms try to
minimize costs. Globally, India remains the undisputed leader
for outsourcing. The recent Global Services Location Index
(GSLI) survey showed India maintained the top position
for the 14th consecutive year in 2016. Because of its large
population of qualified graduates with English language skills,
as well as its ability to accommodate most o¥shore activities,
India remains an attractive outsourcing destination. To date,
India dominates information technology (IT) and business
process outsourcing with a 56% share of the worldwide
market. O¥shoring has been instrumental in driving the
growth of the oce sector in India, where take-up by
this sector has accounted for 60-70% of leasing activity,
especially in Bengaluru, Chennai, Hyderabad, Mumbai, New
Delhi and Pune over the last 10 years.
Looking ahead, we expect an improved economic oautlook
and regulatory environment in India to spur the growth
of this sector in tier-II and tier-III locations, such as
Ahmedabad, Bhubaneswar, Coimbatore, Jaipur, Kochi and
Indore. The challenge for Indian firms is to retain this lead
position in o¥shoring. The cost advantage of an Indian call
center over one in the US has narrowed substantially, but in
high-end information analysis, Indian workers are between a
sixth (1/6) to a seventh (1/7) of the cost of those in the US.¸¹
However, the country has to make progress on a variety of
areas including improving infrastructure to drive the next
phase.
Some companies are already bracing for a big disruption as
technological advances in cloud computing have reduced
the need for coders and technicians, undercutting India’s
low-cost-labor advantage. Industry experts estimate that
up to 500,000
24
jobs, which are tied to about 12% of total
Grade A oce stock, could be vulnerable to automation
in the next decade. Hence, major Indian outsourcing
companies are making a push to innovate, specifically to
develop capabilities in automation software, o¥-the-shelf
software and analytics, big data, and cloud computing
solutions, against a backdrop of shrinking values of
outsourcing contracts. Infosys, India’s second-largest
software exporter by sales, has made recent acquisitions
in new technologies that gave teeth to its home-grown
automation software platform and mobile-commerce
solutions. US-based Cognizant Technology Solutions, the
Nasdaq-listed outsourcing and consulting company, which
has more than three-quarters of its employees based in
India, bought 13 companies in the past five years, of which
four added new tech capabilities either to its healthcare
business or software platforms.
¸¹
Economist Intelligence Unit
¸º
Automation to Replace Lakhs of Entry, Mid-level IT Execs: TV Mohandas Pai, The Economic Times, July 31, 2016.
13