Outsourcing India: Its Challengers

India is, by almost every measure, the world capital of outsourcing. Indeed, the modern concept of offshore Business Process Outsourcing (BPO) started there. The first 'outsourced' operations were, arguably, not true outsourcing, but instead large captive operations, in which multinationals took advantage of lower costs to centralise regional and even global support functions into a single location. This was not an option for many businesses since it required significant set-up costs and ongoing management issues. However, it established that it was possible to support customers from around the world in a single location and make significant savings doing this. As India developed experience and expertise, the result was the establishment of third-party BPOs. These greatly expanded the potential market and outsourcing to India became something available to almost any company and almost standard business practice over time.

“As the industry's innovators, India developed a healthy lead in the global outsourcing market and has held that lead since. The size has also brought significant benefits to the wider nation,” says Ralf Ellspermann, CEO of PITON-Global, a leading mid-sized BPO in the Philippines. Around 10% of India's GDP comes from outsourcing, and even more when supporting businesses are included, and collectively it forms one of the nation's biggest

employers. As a result, it's not just in the interests of the individual BPO providers to succeed; the Indian government is also invested in the industry's health. The size has also resulted in improvements; operators compete on price and quality and have innovated to attract custom. The result has been an expansion into new areas. For example, offering software development outsourcing would have been unthinkable a few years ago, but it is now recognised as one of the specialities provided by Indian outsourcing. Today, there are very few areas a business can't deliver by outsourcing to India.

However, this is not to say that outsourcing to India is the only option. Its success has also opened the way for challengers. Having led the way, there are plenty that are looking to emulate their success. With a global outsourcing market that is around $250 billion a year and predicted to grow, other nations are having some success. And India itself, the natural destination for outsourcing, may also be reaching the limits. For example, despite the 1.4 billion population, providers can struggle to find staff with sufficient fluency to work in call centres. As providers expand, it is becoming increasingly difficult to find locations with adequate communication links for global outsourcing. And businesses are increasingly diversifying their outsourcing to mitigate the risks of consolidating with a single provider or location, a danger that many were exposed to during the COVID-19 pandemic.

These factors have combined to accelerate the emergence of competitors. New centres are developing in Asia, Africa, South America and even Europe. A typical example is the Philippines, where the government followed a similar model of offering incentives to encourage investment. “Outsourcers took advantage of the low labour costs and English fluency of Filipinos to set up operations there. Indeed, most leading Indian providers have also established operations, employing tens of thousands of Filipinos,” says Ellspermann.

And while India remains, by some distance, the largest overall outsourcing centre, the Philippines has been the leader for call centre and customer service outsourcing for over ten years, largely because of the quality of English their call agents offer. The prospect of India losing the BPO crown might seem unlikely. But increasing diversity and specialism within the sector will mean that outsourcing to India may no longer be the default choice for some types of work like customer service.

(Brand Desk Content)