Skip to main content

Offshoring to India in 2021 Top Trends, Companies, Pros, Cons

· 8 min read
Sana Naz
Sana Naz
A business management academic with corporate sector experience. Sana has been writing for over six years now and she is a keen blogger.

There are many reasons why offshoring might be needed, ranging from reduced costs to expanding overseas, and India is considered as one of the top offshoring destinations and a technology hub by major western technology giants. There are a myriad of reasons, ranging from cost to the quality of services, making India one of the top offshoring destinations. Most technology-based companies are more likely to offshore to India, as you will get to know in the article below, with much other information.

The “What” and “Why” of Offshoring to India1?​

"Offshoring, the practice of outsourcing operations overseas, usually by companies from industrialized countries to less-developed countries, to reduce the cost of doing business." -Britannica

Similarly, if we were to talk about what is offshoring to India, it is when a foreign business decides India as its expanding destination and decides to move its operations there to save costs and benefit from the talent there.

There are many reasons why India is considered one of the top offshoring destinations, which includes not only the cost but also the lenient government policies, round-the-clock work, skilled talent pool, and many more.

  • Types of Offshoring in India: India supports the following two types of Offshoring:

  • External: Outsource and trust your projects to an external service provider hired in India, who will be responsible for taking care of the task and the project. This is also referred to as "offshore outsourcing".

  • Internal: The Company hires its personnel itself for managing operations, instead of using an external service, after setting up a company in India.

The PROS:​

The following are some reasons and answers to the question “why offshore to India?”

  • To Save Cost: This is a no-brainer, as developing countries usually have fewer development costs as compared to developed countries, and the same rule applies here.
  • 24/7 Work: The time-zone difference can be taken advantage of to complete a project faster, by both teams communicating progress in overlapping time.
  • Quality Assurance: Due to high competition, the quality of work is what differs a company from the other. Similarly, in India work is passed through multiple quality assurance tests before being delivered (especially in IT).
  • No Language Barrier: There is no language barrier, as India has the second-largest English-speaking population in the world.
  • Government Policies: India is very outsourcing friendly, the IT Act 2000, the Specific Relief Act 1963, the Indian Contract Act 1972, or the Foreign Exchange Regulations are all examples of government-friendly policies.

The CONS:​

There are always two sides to a coin, the same applies here. Besides all those tempting pros, some cons are mentioned below:

  • Time Zone: The time difference can act as a barrier, where communication delays cannot be afforded, as one of the two would have to compromise and set up an office at night.

  • Cultural Differences: Even if there is no communication barrier, the cultural and social differences remain the same. The most obvious example is public holidays.

  • Productivity and performance tracker: Tracking productivity and performance becomes hard, even if you are working remotely, so you can just imagine how hard it would be when you are countries apart.

Thankfully, there are solutions available now in the form of applications to cater to such problems. Clockbook is one of those solutions, as it helps:

  • Keep track of the offshore team's performance and working hours.
  • Provides a management tool for managing shifts and schedules.
  • Website and app monitoring with distraction alerts allow the employer to monitor the employee's progress.
  • Payroll is now easy to access and process.

The IT industry of India holds the largest share in offshoring. The following are the top 5 trends in the IT sector in 2021:

  • Intelligent Machines:

Intelligent applications are the future of the IT industry and the trend is hot in India too. Technologies including machine learning, deep learning, artificial intelligence, IoT (Internet of Things), etc. are all the technologies used to construct intelligent machines to automate tasks.

The intelligent machine gives rise to automation, which in turn can reduce the workforce and save costs. This rise in automation will lead to human-less workplaces and eliminate human errors.

  • Speech to Text:

Speech to text is also part of the intelligent machines and falls in the category of speech recognition. It converts spoken words to text, which can then be used for searching. Alexa and Siri are the top examples of voice search.

India is making progress with leaps and bounds in this area to the point that it may become the top player in this industry.

  • Smart Systems:

Smart systems are another by-product of AI and IoT. Smart home system is one of the top examples of smart systems, with an ever-growing market.

Big names like Philips are taking part in these smart systems trends and are providing solutions. IoT-based devices paired with AI-based solutions give rise to smart systems which are automated and cut off any human interference.

  • Cloud-Based Solutions:

Cloud-based solutions have made companies more secure, and make it easy to store, manage and process data. Especially during these COVID-19 times, the companies have become reliant on cloud-based technologies. The trend importance of cloud-based technologies can be deduced from the fact that Google is going to set up its second cloud region in India. This will make India a major hub for cloud computing services.

  • 5G:

This trend was especially saved for the last in the list, as it is expected to revolutionize the service delivery system by 2022 in India. 5G is a technology that is expected to revolutionize the world and can improve any country which holds a major share in its financial situation.

India's giants like Airtel, Jio, Vodafone Idea, and MTNL are all running 5G trials.

5 Offshoring Giants in India:​

The bigger the client's value, the greater is the importance of the business, the same rule applies here. The following big giants are part of the Indian offshoring Industry:

1. Microsoft:

Since 2010 Microsoft has been a part of India's offshoring industry. It all started when a three-year contract was signed off between Infosys technologies (Indian) and Microsoft to manage important parts of its global internal IT operations. This deal includes outsourcing services like:

  • Software development
  • Quality Assurance
  • Technical Assistance etc. Recently during the COVID-19 pandemic, Satya Nadella (CEO Microsoft) said:

"We’ve seen two years’ worth of digital transformation in two months."

2. CISCO

CISCO is another well-reputed and World-leading networking solutions provider with 7 offices in India spread across different cities. An investment of $150 million was made to expand its offshore development center (Cisco Global Development Center) in Bangalore, India. India serves as 15 percent, of the total global employee strength of 73,000.

3. General Electric (GE)

GE in India has two listed companies – GE Power India Limited and GE T&D India Limited, which are listed on the stock exchanges in India.

An investment of $250 million worth, was made in the following categories:

  • Infrastructure
  • Healthcare
  • Real Estate

The research center in Bangalore is considered one of its second-biggest research centers.

4. Ford Motor Company (FMC):

FMC is an American multinational manufacturer and it offshore the following services to India:

IT. 24/7 Customer Support. Software development.

It all started with the company only offshoring small office back work to India, however, with time it grew into the above categories.

5. Norscot:

It is a European-based oil and gas company with its office in Mumbai. The branch in Mumbai was first registered as a consultancy firm, which has evolved enough to offer the following additional services: Rig project management. Drilling services and supervision. Specialized in oil and gas equipment and services, etc.

6. Genpact:

Genpact has been operating since 1997, it is the largest business process outsourcing company in India. IN 2007, a contract was made with an Indian company known as NDTV to offer outsourcing services for the media industry.

7. Transocean:

It is a Switzerland-based offshore drilling company having offices in 20 countries, from which one is India. Recently, Transocean has won many contracts, from which one is Reliance. NSE (RELIANCE) exercised a seven-well option in India for the Dhirubhai Deepwater KG1 drillship until Nov. 2022 ($127,000). CONCLUSION:

India is truly one of the largest offshoring destinations for western developed countries due to its highly skilled workforce available at low cost and round-the-clock quality work. Even though the pandemic has caused an economic decline globally, and concerns were raised about outsourcing in India too, India has still proved its worth (especially in the IT industry) by winning new deals and increasing revenue.