Future of Outsourcing in India

With plenty of talent and cheap cost labour, US and Europe are outsourcing all their back office work to India. The ability to understand and communicate in English is one of the competitive advantage that India has over China. Though China has cheaper labour than India, it has never been able to compete in the IT industry. With an intention to have a bite in this outsourcing pie, other countries like Pakistan, Russia, Columbia are already in the race. But India is way a head of this race and leads the show. India is the number one choice for outsourcing in the world. But can India sustain this leading position ?

With George Bush's regime coming to an end in 2009, the next most likely party that would win the elections and come to power is the Democrats. But Democrats have a different tune to sing. They are more concern over the job insecurity which is now a major issue, among the Americans. Infact, a new word called "Bangalored" is added to the dictionary which actually means an American getting a pink slip due to the work being outsourced to Bangalore. Democrats are against the idea of outsourcing. But the business class favours outsourcing as they can get the work done at a cheaper rate, which gives them strategic advantage in the industry competition. Though Democrats cannot take a drastic decision of stopping outsourcing completely, a possibility of making outsourcing difficult cannot be ruled out. The answer to this can be obtained in 2009 after the US Presidential elections.

Though IT companies are enjoying huge profits and low taxes, the rules that favour this industry are valid only till 2009. Indian government wanted to promote IT outsourcing and hence had reduced the taxes and most of the laws favoured IT companies. But in 2009, in order to balance between the economic status of different industries in India, it is likely that the tax would be increased on IT products and services.

Inspite of the above arguments which doesnot favour outsourcing, there is some good news for IT industries in India. The type of jobs that are outsourced to India are those of callcenter types or includes repetitive work which can be easily replaced by automation. But the US and the European countries have realised that Indian talent pool is much beyond this call center job. Top level jobs, strategic jobs, middle level management jobs are also being outsourced to India. The demand will shift from the software engineer's level to the middle and the top level management. With this trend slowly starting, India has nothing to worry about sustaining its position as the "Leader of Outsourcing".