Indian is considered to be a locomotive among economies. The gross domestic product (GDP) grows by an average of 5 to 6 % each year on the subcontinent. Economic forecasts predict that the growth will significantly increase in the next 10 to 15 years and that it will far exceed the 10% mark.
One of the most important factors in the Indian growth is the offshore outsourcing of IT based services (ITO for short) and IT supported business processes (BPO). India enjoys the lion’s share of the global outsourcing market for ITO and BPO and is significantly ahead of other low-rates countries such as China, Russia and the Philippines. In addition, India is the outsourcing world leader in exporting software. 95 countries worldwide use Indian software and IT specialists.
The IT back office of the world
The reasons for India’s rise to the world’s leading IT offshore outsourcing nation are varied. Human capital on the subcontinent is an inexhaustible resource. Each year about 3.1 million highly qualified professionals graduate, from which about 500,000 studied engineering sciences and who are potentially available on the outsourcing market. Some of them were educated at one of the seven Indian Institutes of Technology (IIT) or at one of the six Indian Institutes of Management (IIM). These institutions are among the best schools in South and Southeast Asia. In addition, more than 2.5 million established, Anglophone IT specialists live here, who have already been working for years and decades as offshore staff for international companies.
A further great advantage of the Indian IT outsourcing industry is that the employees work at significantly lower rates than their European and American counterparts. While a European IT specialist will earn on average 50,000 to 60,000 euros per year, the salary for an Indian IT employee with several years of experience is around 6,500 euros per year. Young Indian professionals earn around 4,000 euros per year.
In addition to the wage costs and the human capital, the entire cost of outsourcing is a decisive factor that has established Indian as the IT back office of the world. With a total cost of about 7,200 euros per employee per year (source: Deutsche Bank Research „Outsourcing to India: Crouching Tiger Set to Pounce“), Indian is significantly more profitable than other outsourcing nations. The total cost of a Chinese IT specialist is around 10,000 euros per month, and a Malaysian is around 13,000 (source: Deutsche Bank Research „Outsourcing to India: Crouching Tiger Set to Pounce“). By outsourcing, companies can save at least 20 to 40% on costs.
The future of IT outsourcing lies in India
The growth of the IT sector began in the 1990s. Many IT centres emerged in India thanks to the economic reform, which made the country increasingly more attractive for foreign investors and outsourcing. A globally significant offshore outsourcing sector has emerged, especially in Mumbai, New Delhi, Bangalore, Chennai and Hyderabad, specializing in IT based services and IT supported business processes.
In the coming years, a further increase in the global demand for highly qualified IT specialists at low rates is expected, which will significantly benefit India’s economy. Competition from other outsourcing nations has affected the subcontinent proactively, causing the education system to be further expanded and qualified offshore employees for the Indian outsourcing industry to be recruited from Bangladesh and Pakistan.