What is the current state and the future direction of Indian IT/ITES outsourcing? Is it dying or is it already dead?


What is the current state and the future direction of Indian IT/ITES outsourcing? Is it dying or is it already dead?
What is the current state and the future direction of Indian IT/ITES outsourcing? Is it dying or is it already dead?

Date: 16.03.2018

The death of India’s outsourcing industry was speculated from the day 1. People talked about Ireland, then Philippines, then China, Chile, Argentina.. Although all these countries have grown their service industry, Indian IT/ITes is still thriving.  If it were a simple matter of wage, then there are always much cheaper destinations than India. But, such an outflow is not happening. There is a reason why India took to the path of services while no other nation at our stage of economic development is this service centric. 


  1. Poor infrastructure. IT Companies are forced to handle a lot of things that the government is expected to do — train graduates, run buses, run captive electricity production.
  2. Weak Politics. Indian government is not hungry for IT growth anymore. 
  3. Excess reliance on English. India is heavily dependent on US, UK and Australia.


  1. Strong companies. Unlike India’s competitors — China and Philippines, India has a mature IT industry with a bunch of market leaders. Many of India’s competitors are highly fragmented leading to competitive pressures and poor economies of scale. 
  2. Indians hack things to survive India (termed jugaad). Without those hacks, we would not be able to live in India. For instance, our way of driving packs the maximum number of humans per sq.m of road. Such hacks are a great preparation of entrepreneurship (in fact incubators such as YCombinator explicitly ask and reward such hacks in their application). As outsourcing gets more complex, India has prepared a horde of street-trained entrepreneurs to manage the global service industry. 
  3. India thrives in extreme ambiguity. Indians on the street have to manage a level of complexity that is very hard to see elsewhere. In a world where projects are getting increasingly ambiguous and complex, Indians will get to play their natural strengths. In manufacturing, our attitude is a disadvantage as manufacturing requires a certain precision and discipline. But, in service sector, ability to deal high levels of ambiguity is a plus.
  4. Indians can cope up with diversity. In a global economy, diversity is the key. We need to handle multiple tongues and the ability to accept a variety of people. Many educated Indians can deal with 3 languages (English+Hindi+mother tongue) and even to move to an adjacent state, we need all the adaptation skills. On the other hand, most of our neighbors have a single national language. This ability to speak multiple languages and deal with diversity enables us to compete comfortably in service sector with countries such as China, Japan and Germany — all with much superior technology infrastructure. 
  5. India still has a massive untapped labor. A lot of people complain about wage increase and labor shortage. But, in a nation of 1.2 billion people, where the average wage is $1000/year such complaints look silly. The real problem is that, our systems are not training enough quality people to keep up with the demand. As we keep increasing our quality and as mentoring grows wider, we can supply 100s of millions to the service industry; A few of my classmates came from dirt poor families that made less than $1/day. Their kids now receive world-class education in top schools.
There is no right answer to this, but IMHO, Current style of Indian outsourcing should die (change). Now there are multiple POVs that come to mind when I say current style. Let me explain it
  1. Very few companies have their R&D out sourced to India. This is a style/outsourcing I want to see in Indian services sector.
  2. Indian service sector should be choosy in their service offerings, rather than taking any project such as manual data entry, BPO and tech support should die. They are jobs that won’t help the nation to develop in terms of technology, research.
  3. Indian service sector should look at niche service offerings that add more value. Like product outsourcing, research outsourcing.
The above 3 points look same, but there is slight variation. Look at currently emerging Analytics services companies in India like (Mu-Sigma)Decision Sciences and Analytics Solutions, Absolutdata(AbsolutData — Intelligent Analytics). They are niche and also generate good employment opportunities. Such service offerings don’t only make you contractors, but allies to you clients in their strategy, vision.

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