India has become one of the most sought-after offshoring destinations in the world, even outranking some countries in Latin America and Eastern Europe.
For some companies, offshoring to India is a strategic necessity for cost savings. For others, it is a ticket to expand their overseas operations.
In this article, we will explore why offshoring to India is increasingly popular and highlight five major companies engaged in the practice. We will also discuss the major advantages and challenges of offshoring to India.
This Article Contains:
(Click on the links below to go to a specific section)
- What is Offshoring to India?
- About the Offshoring Industry in India
- 5 Popular Global Companies That Offshore to India
- 5 Major Benefits of Offshoring to India
- 3 Key Challenges of Offshoring to India
Let’s get started.
What is Offshoring to India?
Offshoring to India is when a foreign company moves its business operations to India, usually to benefit from cost savings. For example, if you run a firm based out of Germany or the United States, you could shift some of your business processes to India.
Most companies move their operations to India to benefit from the country’s lower cost of living, skilled talent pool, and favorable government policies. (More on this later.)
Now, you can take two approaches when offshoring to India:
- Hire an external service provider in India to perform your tasks or projects. This is known as offshore outsourcing.
- Set up a company in India and hire your own in-house team to manage operations.
Confused about offshoring vs. outsourcing?
Explore their key differences in our in-depth offshore vs. outsourcing guide.
About the Offshoring Industry in India
There are several business activities foreign companies can offshore to India to gain a competitive advantage.
But this Asian country’s offshore outsourcing industry is largely known for handling tasks like:
- Software outsourcing and ITES (Information Technology Enabled Services).
- Intellectual Property (IP) outsourcing.
- Medical transcription outsourcing.
- Custom software development outsourcing.
- Healthcare BPO (Business Process Outsourcing).
Cities like Bangalore and Mumbai have become popular ITES/BPO hubs, positioning the country as a great offshoring destination globally. A major factor behind this is the increase in IT services provided by offshore outsourcing firms like Infosys, Wipro, IBM, etc.
And with an increasing number of IT and service vendors setting up businesses in India and China, the Indian offshoring industry continues to grow rapidly.
Top 5 Trends in the Indian IT Sector
A large part of the Indian offshoring industry includes engineering and software outsourcing ventures. Let’s check out five trends in this sector:
1. Hyper Automation
Hyper automation is an IT industry application commonly based on machine learning, artificial intelligence, IoT (Internet of Things), and Robotic Process Automation technologies.
It aims to optimize the performance of systems by reducing or eliminating manual intervention and human errors. This results in higher productivity rates and better access to data for decision-making purposes.
2. Voice Search
Voice search is one of the most advanced speech recognition technologies. It can translate your spoken requests into text, which is then transferred to a standard database search system.
And with voice search queries in India growing at 270%, the country could become a major player in voice technology development and usage.
3. Smart Systems
AI-powered solutions, like smart home systems, are becoming increasingly accessible to all. Like eDomotics, Philips, etc., several IT companies in India develop ready-to-use smart home system solutions.
In general, these systems contain IoT-based devices, making the machine-to-machine communication model possible without the need for human interference.
4. Cloud technologies
Another trend in the Indian IT industry is cloud technologies.
It helps companies securely store, manage, and process data on the Internet. And the COVID pandemic has increased the reliance on cloud technologies to carry out business operations — even for businesses in the manufacturing sector.
In India, Google has announced that it will set up its second cloud region in India, in Delhi. Moreover, the government’s initiatives like the Cloud Vision for India 2020 aim to position India as a major global hub for cloud computing services.
The last technology trend on this list is 5G, which is set to revolutionize service delivery systems by 2022 in India. Some examples include VR (Virtual Reality) and AR (Augmented Reality), alongside cloud-based gaming services like Google Stadia, NVidia GeForce Now, etc.
Several major companies In India like Airtel, Jio, Vodafone Idea, and MTNL have been granted permission to begin 5G trials.
5 Popular Global Companies That Offshore to India
Here are some industry giants that have reaped the benefits of the Indian offshoring industry:
In 2010, Microsoft partnered with Infosys Technologies (an Indian vendor) and signed a three-year deal to manage important parts of its global internal IT operations. This involved outsourcing services like software applications, technical assistance, etc.
The deal also covered over 400 locations through 100+ countries — including Bangalore, one of the major IT hubs in India.
2. Ford Motor Company (FMC)
The American multinational automobile manufacturer chose to outsource its IT, customer support, and software development activities to India.
In the beginning, the company only directed its back-office work to India. As Ford received high-quality and reliable services in India, it also decided to offshore software development.
With excellent offshore operations underway, the company also shifted its call center to India to offer reliable 24/7 support.
3. American Express (AMEX)
American Express is a multinational financial services corporation that decided to offshore to India.
AMEX offshores its back-office operations and other business process outsourcing tasks to India. The company also partnered with Tata Consultancy Services (TCS), a multinational information technology and outsourcing company in India.
And besides India, they also offshore to the Philippines, a popular offshore location in Southeast Asia, to handle its customer service.
The multinational networking firm invested millions of dollars in structuring and advancing its technology development in India.
The company even established its second-largest research and development facility in Bangalore, India. CISCO built the Bangalore center to help the firm with offshore operations, like:
- Deploy products and solutions quicker.
- Develop new technologies.
- Provide technical support to meet customers’ demands.
The company now has seven offices in India, spread across major cities like Hyderabad and Mumbai.
5. General Electric (GE)
The American company has established a state-of-the-art research and development center in Bangalore. It is also the second-largest GE research and development center in the world, staffed with a vast number of Indian experts.
The center has the latest engineering tools and technology and is responsible for interacting with General Electric’s suppliers, branches, customers, partners, and other technology centers across the globe.
GE also set up an e-knowledge center in India to distribute knowledge and technology developments to its business centers.
5 Major Benefits of Offshoring to India
Offshoring to India can offer your organization a competitive advantage over other companies in your home country. Here are some of the benefits that make this possible:
1. Cost Advantage
The most popular reason why most companies prefer offshoring to India is the cost advantage.
Unlike operating with an outsourcing provider in western countries or hiring an in-house team, offshoring to India helps you reduce the total cost without compromising services or quality.
It reduces the expenses related to employees, such as recruitment, salary, etc., and decreases the cost of setting up new equipment. This is largely due to the lower cost of living in India than in Western countries like the United States.
2. Favorable Government Policies
IT is one of the top industries in India, and the Indian government has favorable policies that make the country an excellent investment and offshoring destination.
Since the introduction of the Information Technology Act, 2000 (ITA-2000), the Indian government has played a significant role in giving tax-related and other financial benefits to businesses.
These include recognizing electronic contracts, supporting e-filing of documents, and preventing cybercrime. When you combine that with movements like Digital India and economic reforms like GST, offshoring to India becomes even more desirable.
3. Access to Young and Qualified Technical Professionals
Offshoring needs a proficient workforce, and India is a suitable provider.
With its large population and exceptional universities, the developing nation produces engineers and doctoral graduates on a massive scale each year.
Whether you need IT professionals, BPO (Business Process Outsourcing) experts, etc., an Indian offshore outsourcing firm or company can offer a large number of qualified people. If you want to recruit your own team, you can choose from a vast talent pool.
And usually, an Indian worker will be highly skilled and well trained for any given project, making it easy for you to sign your outsourcing contract right away.
4. English Language Advantage
A large population of the country speaks, reads, and understands English easily.
With their strong command of the English language, you will hardly face any communication problems. This makes communicating project demands and updates with your Indian providers relatively effortless, helping you maintain smooth workflows.
5. Quality Service Providers
Your offshore team in India will most likely have prior experience of collaborating with international organizations. Their diverse portfolio of services improves the pace and quality of delivery.
Moreover, most Indian work practices comply with ISO (International Organization for Standardization), SEI (Software Engineering Institute), and CMM (Capability Maturity Model) standards. This makes them a quality service provider with a thorough understanding of your needs.
Indian companies are also known to be very accommodating and will deliver high-quality services even though the labor cost is low. This, in turn, translates to timely deliveries by your service provider.
3 Key Challenges of Offshoring to India
Offshoring to India may sound like the perfect approach, but it has its share of problems that you should be aware of.
Let’s take a look at some of them:
1. Time Zone Differences
When offshoring, the differences in time zones can be a significant obstacle.
Several offshoring Indian companies may work within a five to twelve-hour difference from an American or European company.
So unless your offshore outsourcing partner offers to set up a team for late-night shifts that match your company’s time zone, you may have to put up with communication delays.
2. Cultural and Social Differences
Even though most Indians are comfortable with English, cultural and social differences remain.
For example, public holidays are rarely the same. You will have to factor this in and consider the impact it will have on your deadlines.
You will also need to be sensitive to the religion and culture prevailing in the Indian outsourcing company to avoid misunderstandings.
3. Difficult to Track Productivity and Performance
When you are countries apart, it can be challenging to track employee productivity and performance.
How do you tell if the employees were actively working during billable hours?
Don’t worry. You can use productivity management software like Time Doctor to gain insights into your offshore team’s performance.
With this powerful employee time tracking and performance management tool, you can:
- Track your offshore team’s work hours with interactive time tracking features.
- Prevent them from wasting time on irrelevant websites, apps, and social media with distraction alerts.
- Find out if someone accesses a website or app that violates company policies with website and app monitoring.
- Manage their shifts and schedules with ease.
- Generate productivity reports to analyze your team’s performance.
- Easily process payrolls with payroll integration.
India is a popular offshoring destination for several American and European companies — especially for the IT outsourcing community.
There is no doubt that offshore outsourcing to India can help you with quality work at a very low cost. However, you must do your research before deciding to dive into the offshore outsourcing industry in India.
You can only enjoy the benefits of offshoring to India if you are sure it is the right choice for your business.
Lauren Soucy is the VP of Marketing for Time Doctor, the world’s leading time tracking and productivity software. She has 15+ years of experience in marketing at fast-paced companies. Her first passion is SEO, she can’t start her day without coffee, and she enjoys spending time at the beach with her two boys and her husband.