According to industry estimates, the Indian offshore IT and BPO market is worth USD 17.6 billion, which is about 44 percent of the total global IT and BPO offshoring market (about USD 40 billion). Over the past decade or so, India has emerged as an attractive destination for offshore outsourcing for a number of reasons. Companies all over the world are offshoring many different processes to India to harness the benefits offered by the country. Following are the key factors that contribute to India’s position as a preferred destination for offshore outsourcing:
India's 380 universities and 11,200 higher education institutions produce millions of college graduates each year. India produces 350,000 engineers each year as compared to 65,000 in the US. As a result, companies have sufficient options to choose from, while recruiting employees for their offshore centers.
In a McKinsey Quarterly Report in 2005, they recommend that multinationals considering India as a manufacturing base should focus on skill-intensive industries to take India's abundant supply of educated and trained professionals. Karnataka State (along with a couple of other south Indian states) has always had a robust private sector in the higher education market that has been a trailblazer for the rest of the country. According to the National Association of Software and Service Companies, a trade group in India known as Nasscom, the country produces three million college graduates every year, of which 350,000 are engineers.
The combination of low wages and a plentiful supply of skilled applicants makes it possible for Indian companies to use managerial practices very different from those generally found in developed economies. The best offshore companies invest heavily to recruit the right staff because they can afford to be more selective. Higher managers to staff ratio. In the United States, high wages are a major reason for the understandable tendency of high-performing companies to strip out layers of middle management and to increase the operating span of the remaining managers, forcing them into administrative and supervisory roles. In India, by contrast, the ratio of managers to staff is much higher, so they can spend more time building the skills of employees. The higher ratio of managers to workers also allows companies to pay greater attention to identifying and implementing process improvements that enhance their operational performance.
One of the biggest advantages of offshoring to India is cost savings. Companies have been able to save about 30 to 40 percent for most services by outsourcing processes to India. Cost savings in India can be accounted for by savings in the following three heads:
India and the US have a zonal time difference of about 12 hours, thus effectively giving companies a 24 hours work environment. Most of the processing functions are performed during the day time in India, when it is night time in the developed countries. As a result of this zonal time difference, there is little or no backlog in tasks.
Many BPO projects have onsite and offsite teams. The onsite team works during the day at the client site and hands over the work to the Indian team before retiring to bed. The offsite team then works on the same project as it is day time in India. When the Indian team retires to bed, the onsite team takes over the work, thus significantly reducing the project turnaround time.
In all good educational institutions, from kindergarten to graduation & beyond, the preferred medium of education is English resulting in a significantly large population of educated & qualified professionals being conversant if not proficient in the English language.