Saturday, August 25, 2007

India faces battle for outsourcing

As US and European companies look to cut costs by moving many of their operations abroad, India has stepped in to become a world leader in IT outsourcing.
However, success has attracted imitators and India is facing a fight to keep its position at the top.
India now leads the world in offshore outsourcing - the remote servicing of information technology (IT) or other business processes by staff based in India.
The value of outsourcing to India in 2007 is estimated at $47.8bn (£24bn), ten times what it was worth back in 1998.
Expansion is happening fast, and the IT outsourcing industry is predicted to continue growing at about 28% a year.
The sector has become a very important part of the overall economy of India, creating growth and new wealth in a country that has only enjoyed economic liberalisation since the early 1990s.
IT and business process outsourcing (BPO) services now account for 5.4% of India’s gross domestic product (GDP), and have had a huge impact on cities such as Bangalore, the centre of the industry.
Chasing pack
But India’s success in hi-tech services has not gone unnoticed.
From Mexico to Vietnam, local governments are busy creating investor-friendly tax policies, such as special ‘export-zone’ offices on the model of India, where offshore work is free of domestic taxes.
They are also encouraging the creation of new trade bodies to represent and promote their industry in the same way that India’s National Association of Software and Services Companies (Nasscom) has been doing since the 1980s.
One of main threats to India has been the expansion of the European Union (EU).
In 2004, the EU expanded east to accept ten new member states, and then went on to welcome Romania and Bulgaria into the union earlier this year.