Innovate to maintain India’s supremacy in outsourcing

India continues to reign supreme as the pre-eminent outsourcing destination for IT and BPO services. This in spite of emerging destinations around the world- countries in Eastern Europe, South East Asia, Latin America, and of course, China.

The large talent pool and knowledge of English scale are clearly key reasons for the industry to have thrived thus far in India. But to hope that these will forever remain a competitive advantage is naive at best and foolish at worst. India’s expected GDP growth rate will be in the 9-10% p.a. for at least the next 5 years- driven partly by rising exports and partly by the demand expansion within the country. New industries will emerge, new foreign companies will set up shop in India and existing Indian companies will continue to grow rapidly. All this will require new talent- and this talent too will have to come from the same pool that today serves the IT and ITES industries. Wage costs will spiral, talent quality will decline and the magnificent edifice of the Indian IT & ITES industry as we know it today will start to crumble.

So what is the solution? Apart from the obvious resonse of establishing new delivery centers in other cost-effective locations (in the initial years, these savings will be offset by the investment required for infrsatructure, training etc.), what is needed is for India to explore new frontiers in outsourcing. If clinical research, equity research and legal research can be done from India, why not large-scale outsourcing of advertising processes such as creative & copy or indeed, even design and analysis of market research? Let the brief be developed “in-market” and passed on to a team of bright designers and copy writers in India. Why should “product design” and “services” be separated? Why not outsource engineering design- as well as manufacturing- to India?

The key is to expand the scope of what can be outsourced to a remote location such as India. The really smart western MNCs will look to use their outsourcing centers in India to develop products for local markets as well- so that they don’t lose out on the burgeoning demand in India.

If we can do all this right, it will surely be another case of chak de India.