India: The cost of outsourcing

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Outsourcing has certainly produced some advantages. India undeniably would not have seen such a great economic boom without its rise in the 2000’s. The liberalization of the services sector and loosening of government regulations on human resources and technology contributed to the spread of outsourcing. The Indian Institutes of Technology (IIT’s)—developed after independence—are now among the most prestigious universities in the nation. Outsourcing allows for companies in North America to continue working during hours when most people are sleeping due to the vast time difference, and the influx of jobs in the centers and institutes has resulted in higher quality real estate and neighborhood development in the surrounding areas. Outsourcing to India was first used by European airlines, including British Airways, in the early years of the 1980’s. The city of Delhi was used as a strategic base for back office operations, and many other airlines, such as American Airlines quickly followed in their footsteps. Jack Welch—CEO and Chairman of General Electric—went to the Indian city of Gurgaon to test out voice operations. The results were favorable, and General Electric greatly increased their presence in India thereafter. Today, India is seen as a leader in software engineering and BPO (business process outsourcing) in the global economy. Since the 1990’s the latter has grown at an alarming rate. In 2005 alone, it grew by over 38%. The industry provides $7.2 billion worth of services and as of 2008, around 0.7 million people work in outsourcing. All told, about four-fifths of the world’s 500 largest companies now outsource to India.