In the wake of exogenous and endogenous developments, is India challenged as a dominant offshore destination? Probably not. It is arguable if India’s dominance is a foregone conclusion. Almost certainly, India is likely to lose some market share though.
Endogenous factors that raise a question mark on the dominance of India include talent shortage, creaking infrastructure, unyielding bureaucracy, and rising cost structure on the back of rupee appreciation (though recently rupee has succumbed to dollar by circa 5%). Exogenous factors, on the other hand, encompass diversity and resilience requirements of the buyer community beyond India, incentives offered by various governments to offer competition to India, and the frantic pace at which English is being taught in China et al.
Despite the constraints and inhibiting factors, India is, likely to remain the most attractive destination for delivery of offshore services in the medium to long term. Here’s the rationale:
- No other country, except China, can offer the scalability of offshore delivery that matches India.
- Talent of management personnel offered by India is unique and
competitor countries including The Philippines and Brazil fall short on
this parameter. - Cost structures, though increasing, are still comparable or a shade
lower than most competing providers. They’ll also be mitigated with
deeper penetration into smaller towns/cities within India where the
cost of living is much lower than other fast developing and emerging
countries, except probably Bangladesh and Pakistan as an example and
they have other strong reasons that have prevented them from growing
their offshore attractiveness. - Demographic profile of India remains the most attractive amongst the peer set of large countries.
- Indian rupee appreciation is not an aberration as the weakening dollar
strengthens the currencies of the most fast growing and emerging
economies.
India has mastered and perfected the art of global and remote service
delivery. But as long as India fights internal challenges and other
countries remain insulated from the threat of India due to cultural,
linguistic and political alignments, other countries will garner some
market share of the global services delivery.
To sum it all up, India will lose some share over the next 5-8 years,
but unlikely its dominance. There is no getting away from India-based
providers who are globalizing and enhancing their market share. It’s
highly improbable that any new indigenous player will rise to the point
of posing a challenge to either MNCs or India-based large providers in
the battlefield of global services delivery. Do you agree?
Dinesh is a highly experienced and well-respected advisor in the outsourcing industry with more than 23 years of experience in management consulting and outsourcing. He works with enterprises to craft sourcing strategies, structure and negotiate complex sourcing transactions and design and implement sourcing governance organizations. Prior to joining ISG, Dinesh worked with Infosys and Accenture, where he led large transition programs and consulted on IT strategy and implementations, business process-reengineering and operational improvement programs. He is a published thought leader and a regular speaker at industry conferences. Dinesh manages the ISG India Business.
