Smart Shoring by Indian Service Providers to drive India Offshoring

A recent report says that

"In the late 1990s, India’s software industry started booming. The threat of the so-called Y2K bug and an abundance of well trained, technically skilled and relatively cheap labour opened the country’s eyes to the potential of business outsourcing. The government soon realised that if it did not facilitate massive investments in telecommunications infrastructure, it would lose out on an enormous economic boost. Now, more than 300 000 fixed lines and more than 2 million cellphones are being added a month.

"The National Association of Software and Service Companies (Nasscom) is saying that income from business process outsourcing (BPO) has increased tenfold over the past decade. The industry has set a revenue target of $60 billion (R435.5 billion) by 2010, up from an estimated $47.8 billion this year. Back in 1998, industry revenues were $4.8 billion.
"Nasscom estimates that as a proportion of national gross domestic product (GDP), the revenue aggregate of the Indian technology sector has grown from 1.2 percent in 1998 to an estimated 5.4 percent this year. Direct employment is more than 1.6 million people.

"The US and the UK are the dominant markets, contributing to 67 percent and 15 percent of total exports respectively, but Indian firms are also exploring new markets. Banking, financial services and insurance are the main sectors, accounting for nearly 60 percent of the total, but manufacturing, retail, media, utilities, healthcare and transportation are growing rapidly.

"India remains a choice destination for BPO and is key to any global BPO strategy, but Indian firms have started outsourcing to even cheaper destinations as they move higher up the value chain."

The reference to Indian firms outsourcing to even cheaper destinations is an interesting one. This is more to do with the BPO firms that are increasingly looking for "Smart Shore" options in countries such as China, Sri Lanka and others where in BPO is in early stages of adoption. Such an industry landscape allows the service providers to transfer work primarily at low end of the value chain and realize two fold gains -

1) Increase the process profitability by leveraging low cost resources in the Smart Shore locations who do not attrite faster &

2) Free up the existing trained resources in India to take on work at the higher end.

This seems to work well in case of non voice processes that are predominantly rules and decision based.