No longer just cheap labour

If you thought India’s outsourcing industry is just about graveyard shifts in tacky call centres, then you are wrong. A nation that once based its appeal on low-cost menial tasks is now a world leader in a wide range of technically specialised industries. From big data and law to engineering and consultancy, India has become an outsourcer offering brain power, rather than merely manpower.

This change is epitomised by engineering. India’s top trade association, the National Association of Software and Services Companies (NASSCOM), expects the Indian engineering research and development industry to hit $40 billion by 2020 from its current $10 to11-billion mark. This is widely attributed to India’s cost-effective development and design solutions, and a vast talent pool of engineers.

From India’s Tech City in Bangalore, Tata Consultancy Services (TCS) tests car models and engines for the biggest automobile makers in the world. Infosys, another leading IT and engineering firm, helps develop commercial aircraft from its engineering hub in the city.

To get more foreign companies to its shores, India hosts the Engineering Outsourcing Show in Mumbai every year. This year’s show in January saw top global firms, including Swiss giant ABB, US powerhouse Cummins, Toshiba of Japan and 50 other international corporates, exploring opportunities for outsourcing their critical businesses to Indian engineering firms.

Another outsourcing sector hotting up is data analytics. This sector gained momentum when big global players, such as Lenovo, Pfizer and Target, outsourced their analytics functions to India. Dell Global Analytics, an India-based captive analytics division of the company, continues to expand, reflecting Dell’s reliance on India as its number-one services location outside the United States.

India is feeling the competition and is becoming even more competitive in response

According to financial services firm Avendus Capital, the global data analytics outsourcing market in 2012 stood at $500 million, of which Indian service providers delivered $375 million. By 2015, the data analytics market in India is expected to reach $1.15 billion.

India’s IT prowess has also sparked a boom in financial outsourcing. Dallas-based BancTec, which provides financial transaction services to 75 per cent of the world’s leading financial services organisations, set up a headquarters in Delhi to cash in on financial firms coming to India.

Martin Edwards, an outsourcing consultant with BancTec, says: “There’s no stopping the expertise and ambition of outsourcers in India. As inflation rises and wages increase, Indian service providers are becoming increasingly competitive to survive. But they are also changing their global position – Indian companies are now some of the largest on-shore employers in the UK. The perception that off-shoring means a loss of jobs on-shore is fast becoming a myth.”

There are other players entering the market too. Last year, India’s Tech Mahindra signed a five-year agreement with Luxembourg’s UBS Fund Services to provide a finance platform to support asset managers, wealth managers, investment banks, custodians and administrators.

Law process outsourcing is also gathering pace in India. According to the Economic Survey 2012-13 by Indian Finance Minister Shri P. Chidambaram, India is one of the best legal process outsourcing (LPO) destinations in the world. For a country that has 1.2 million registered advocates and produces up to 70,000 law graduates every year, this comes as no surprise.

The rise of the sector has put a lot of Indian LPOs on the global map. In March, financial investors were reported to have offered $200 million for Gurgaon-based LPO firm UnitedLex Corporation.

The availability of talent, telecom, real estate and IT support has made India a hub for HR services. Result? A burgeoning human resources outsourcing (HRO) industry. It makes perfect business sense for companies in the UK or the US to outsource their HR functions to India to cut costs. Big players in India include TCS, Wipro, Hewitt, Convergys and Accenture, among others.

India may well be the outsourcing champion of the world, but it needs to be on a look out for threats to maintain its position. Competition is creeping up. India can’t afford to rest on its laurels as Eastern Europe, China and the Philippines are fast ramping up their outsourcing industries to woo the world.

BancTec’s Mr Edwards says: “India is an outsourcing hotspot because its talent pool and expertise is unmatched. Nowhere else gives you qualified engineers and programmers by the thousands. But it needs to watch out for Eastern Europe and China. Both are attracting more outsourcing contracts and could become tomorrow’s hotspots. India is feeling the competition and is becoming even more competitive in response.”

But what can India do to keep up with other countries? Mayank Chandra, managing partner at recruitment firm Antal International, thinks that it’s important to exploit growth potentials in tier-two towns, such as Kanpur and Lucknow, to attract more companies.

“One of the biggest reasons for global companies to outsource services to India is its competitive pricing of both labour and real estate,” he says. “But over the years, demand for big outsourcing centres in cities like Bangalore, Pune and Gurgaon has driven up costs of office space and salaries. Therefore, improving infrastructure in tier-two towns will help make these towns global hubs at cheaper costs.”

Big investments are being made to keep India ahead of rivals. In Thiruvananthapuram, a city in southern India, the country’s top outsourcing firm TCS is building the world’s largest corporate training facility. The centre is being constructed on nearly 100 acres of land and will contain more than six million square feet of buildings. It will train India’s next generation of engineers and professionals who will be the face of its burgeoning outsourcing industry.

However, a major roadblock within India is the outsourcing industry’s relatively poor image. A job in a business process outsourcing (BPO) company is no longer considered a good package for candidates and the sector is struggling to attract the right talent.

India’s outsourcing stars may need to do a better job at selling themselves to the world. Given the size and growth potential of the industry, schools and colleges could have curriculums designed specifically to train new talent for the outsourcing sector.

Yet, despite the problems, more foreign players are coming in their droves to India to outsource business functions. India remains the world’s dominant outsource location. Research by Tholons found that Bangalore is this year’s number-one destination for outsourcing in the world. Also, six Indian cities, including Delhi, Mumbai, Chennai and Hyderabad, are among the top-ten hotspots.

The biggest outsourcing sector in India remains IT and, according to NASSCOM, the outsourcing industry as a whole will generate revenues of $13 to $14 billion by 2015. India has come a long way from just being a source of cheap labour. The country’s cutting-edge technologies and talent have made the world sit up and take notice.



Indian IT giant Tech Mahindra has become a $2.9-billion company thanks to its outsourcing operations.

In March, Volvo Car Group selected Tech Mahindra to provide its end-to-end IT infrastructure services in key markets, including Sweden, China and Belgium. The scope of the deal demonstrates how Indian players can take on big projects. The Volvo partnership covers 2,800 servers across Volvo’s global factories and data centres, as well as 4,000 factory devices in Sweden, Belgium and China.

Volvo will use Tech Mahindra’s Infrastructure Management Services team, which provides data centres, computing, networks, security and IT operations.

Vikram Nair, head of Tech Mahindra’s European enterprise division, says the partnership will help Volvo increase efficiency and reduce costs. “Volvo’s values and goals emphasise ‘reliable products and services in all operations, from product development and production, to delivery and customer support’. The vision outlines IT as a competitive advantage for all Volvo business units,” he says.

To bolster its position as an outsourcing leader, Tech Mahindra has also branched out to other services. One such offshoot is Managed Data Services (MDS), a part of the company that is designed to support financial organisations. Last year, MDS bagged a five-year deal to provide Luxembourg’s UBS Fund Services with securities reference data, pricing, corporate actions and tax data.

Pierre-Antoine Boulat, chief executive of UBS Fund Services, says: “By leveraging the Tech Mahindra MDS platform, we can achieve substantial cost-savings and process efficiencies, while maintaining our focus on delivering high-quality services to our fund administration clients.”

Balfour Beatty is another firm using Tech Mahindra’s expertise for its Platform for Growth (PfG) programme. Julia Rogers, business services director at Balfour Beatty, says: “Tech Mahindra has risen to the challenges of PfG and we have formed a good partnership to get the job done.

“Obviously there have been difficult times, but a combination of hard work, flexibility and technical expertise have pulled us through. In a programme of this complexity and duration, there will be many changes to the original plan, but we have always found a pragmatic way of moving forward and keeping things on track.”

Players like Tech Mahindra are becoming outsourcing stars by setting up what are called “shared service centres”. These are their own outsourced finance, IT, HR, legal and procurement teams based in India to cater for global operations.