Wednesday, February 15, 2006


As debates rage on across the globe on the economics of offshoring work to India in the IT & ITES space (BPO), it is time to view outsourcing from the right perspectives. The cost perspective is often harped upon by both Indian companies and their offshoring clients. However the root of Indian competitiveness in this space is not often discussed. This article only offers that historical perspective on why India is suited to be BPO hub of the world.

"Offshoring" is the system of packaging a set of your organization's tasks and hiring another company situated in another country to perform these tasks for you as a billable service. The service providing company provides you a dedicated workforce to perform these tasks for mutually agreed cost and quality terms.

Why India?

The crux of "offshoring" is "cost" and better operating margins for the companies' offshoring to India, China or any other country. But "cost" and "predictable & consistent quality" would be more like it.

India has an edge because you have decent quality English speaking people who are willing to do routine work ("grunt work") at a highly competitive price. As long as it maintains that edge, remains consistent and predictable, India has a place as the software backyard and the backoffice of the world. A large IT manpower pool and dominance of English in higher education system only helps to build India as a preferred choice for "offshoring".

The reason why India is able to have such consistent IT & ITES workforce has nothing to do with India becoming a big power in the IT space or brilliance of Indian programmers or the fantastic engineers of our IITs. It is a consequence of our McCaulay system of education which over 170 years old .

McCaulay & India

Thomas Babington McCaulay (1800-1859) was posted in India in the first half of the 19th century (1835 -1837) under Governor General William Bentick when India was just brought fully under the control of the British Empire. The British throne exercised control on India through its agency the British "East India Company". The company waged bloody battles for most part of the 18th century in India to control political power and every possible resource in India. From 1784 onwards there was a "Board of Control" with members from the House of Commons which defined the relations between the Crown and the Directors of the East India Company.

Coming back to McCaulay; Thomas Babington McCaulay, a master of English prose and literature, was elected twice as the member of the House of Commons, and served as one of the commissioners of the Board of Control for 18 months (1831-1832) whereon he got involved in Indian affairs. The British crown wanted to appoint a person who was not in the offices of the East India Company as a member of the Supreme Council in India. In 1833 McCaulay was appointed to the Supreme Council of India and traveled to India. By the time he sailed backed in 1837, he laid the foundation for two of the most important systems which would change India as a country - the Indian Penal Code and the education system.

The Foundation for English Education

In one of his speeches to the House of Commons in 1833 before coming to India, McCaulay outlined his plan for perpetuation of British governance in India through representative institutions of the government similar to the European model of governance. This institutional framework designed to manage the British supremacy required to be staffed with people who understood the language and the systems. So came up the need for training Indians to occupy these positions. McCaulay was of the opinion that Indians were perfectly in position to be trained to staff a new system of governance. To quote McCaulay "That the average of intelligence and virtue is very high in this country is matter for honest exultation. But it is no reason for employing average men where you can obtain superior men. Consider too, Sir, how rapidly the public mind in India is advancing, how much attention is already paid by the higher classes of the natives to those intellectual pursuits on the cultivation of which the superiority of the European race to the rest of mankind principally depends...". This observation made 172 years back is relevant even today and will find a familiar echo with many supporters of offshoring to India.

McCaulay outlaid the plans for Indian Education System in the McCaulay' Minute of Education which was reviewed and passed by Governor General William Bentick in 1835. William Bentick agreeing to McCaulay's view concurred that the true objective of the British government should be the promotion of European literature and culture in India thus laying the foundation for a permanent position for use of English language in Indian education. Today English has come to stay in free India. Whether the supporters of Indian languages like it or not, it is impossible to replace English as the medium of instruction in higher education, language of governance and the language of technology long after McCaulay and the British have gone. The medium of instruction in Colleges and Universities across India is English and will remain so for a long time in future.

It is this very foundation of English based education rooted in history that makes it easier for Indians to be a preferred choice for BPOs and offshoring work from US other English speaking countries.