Evolution of India as an offshoring and outsourcing destination for foreign MNCs

Abstract

This study seeks to understand the evolution of India as an outsourcing and offshoring destination for foreign MNCs. Outsourcing has been in practice since the 1950s, but had gained prominence only around the 1970s. On the basis of the level of adoption by the industrial world and also the nature of outsourcing, the evolution of outsourcing till date can be classified into three distinct, yet overlapping eras – the Big Bang, the Bandwagon and the era of the Barrierless Organisations. Outsourcing during these eras evolved from traditional outsourcing (primarily to cut costs) to structural outsourcing (to focus on core competencies) to value added outsourcing (to go to the best in the business) and finally transformational outsourcing (flexibility and organizational transformation). The evolution of outsourcing in the IT Industry (worldwide and in India) and the Pharmaceutical Industry (worldwide and in India) are mapped onto this framework with reasonably good fit, though it is to be noted that India lagged behind initially in the adoption of the various outsourcing practices, primarily due to a dormant domestic market and strict regulatory policies of the government. This study also presents multiple case studies of both IT and Pharma companies, who have been exemplars in the practice of outsourcing / offshoring. Using the understanding gained from the study of these companies, the authors present a set of ‘Key Success Factors’ that determine the ability of an organisation to succeed at outsourcing in each of the two sectors. In conclusion, the authors present their views on the future of offshoring / outsourcing in India, given the rapid changes in the global and domestic scene. The authors also present the factors that affect the prominence of an offshore centre in the eyes of the parent, and provide key insights into how prominence can be gained in the parent network.