Future projections and concerns for Job Outsourcing in India
In the annual industry leadership forum called NASSCOM’04, leaders unanimously agreed that the Indian market has reached the next level of maturity and is set to grow. By 2008, forecasts McKinsey, IT services and back-office work in India will swell fivefold, to a $57 billion annual export industry employing 4 million people and accounting for 7% of India’s gross domestic product. That growth is inspiring more of the best and brightest to stay home rather than migrate. More than half of the Fortune 500 companies are already outsourcing work to India. Research firm Gartner on the other hand claims 1 in 10 US technology jobs will go overseas by the end of 2004. According to Forrester Research, in the next 15 years, more than 3 million US white-collar jobs, representing $136 billion in wages, will depart to places like India, with the IT industry leading the migration. Additionally the telecom bubble has burst and growth has been sluggish. Telecom majors like Lucent and Nortel are cutting costs and trying to recover heavy investments. They are therefore looking at Indian software companies to provide offshore solutions to manage their network operations, support systems, billing software, OS integration and business process re-engineering.
India sees this potential and is working towards meeting future demand for knowledge workers at home and abroad. India produces 3.1 million college graduates a year, which is expected to double by 2010. The number of engineering colleges is slated to grow 50%, to nearly 1,600, in four years. There’s a growing movement to boost faculty salaries and reach more students nationwide. India’s rich Diaspora population too is chipping in. Prominent Indian Americans helped found the new Indian School of Business, a tie-up with Wharton School and Northwestern University’s Kellogg Graduate School of Management that lured most of its faculty from the U.S. Meanwhile, the six IIT campuses are tapping alumni for donations and research links with Stanford, Purdue, and other top science universities. “Our mission is to become one of the leading science institutions in the world,” says director Ashok Mishra of IIT-Bombay, which has raised $16 million from alumni in the past five years. Since 2001, Delhi has been furiously building a network of highways. Modern airports are next. Deregulation of the power sector should lead to new capacity. Free education for girls to age 14 is a national priority. “One by one, the government is solving the bottlenecks,” says Deepak Parekh, a financier who heads the quasi-governmental Infrastructure Development Finance Co
Outsourcing is big business, generating global revenues of $298.5 billion in 2003, according to Gartner Inc. Some Americans have realized they can actually make money on this and grabbed the opportunity. “We didn’t create the market, we are following the market,” says Michael Parks, CEO of Deerfield-based Revere Group Ltd., a mid-sized consultancy that acquired a 70-employee firm in Bangalore recently, in order to compete for outsourcing contracts. Outsourcers reap gross margins of 25% to 50% on projects sent overseas, says Jai Shekhawat, CEO and co-founder of Fieldglass Inc., a Chicago-based firm that advises companies on outsourcing. A contractor typically pays between $11.70 and $16.25 per hour, including benefits, to a computer programmer in Mumbai, India, and charges its American client between $18 and $25 hourly for that worker,.