Offshore outsourcing to India has been a popular strategy for companies to contain costs, scale business, and achieve higher ROI for the past 20-plus years. With one of the largest populations in the world, India has an enormous labor pool to draw from. This massive population density feeds outsourcing vendors in Bangalore and Mumbai primarily, both of which have approximately one million people employed with outsourcing providers. This gives outsourcing companies in India the ability to scale programs quickly to many thousands of employees. The availability of a highly skilled workforce has also helped India's outsourcing industry scale to great heights. “Especially in the ITES-BPO sector, India has been the clear global leader. The outsourcing industry, however, is changing and there are three ways this is happening. A new era of technology is being ushered in, led by the accelerated growth of Artificial Intelligence (AI) and Machine Learning (ML). The outsourcing industry is also being disrupted by service buyers' evolving prioritization of Customer Experience (CX) over cost-containment as well as a flood of new competition from countries entering the outsourcing space,” says Ralf Ellspermann, CEO of PITON-Global, an award-winning outsourcing provider.
Led by the phenomenal success of companies like Amazon, CX has been the number one priority for outsourcing buyers in North America for several years now. For the last two decades, for companies interested in outsourcing various business processes, cost savings were the overriding benefit. No longer. Now organizations have put a premium on delivering premium customer experiences. In India, however, the trend has only recently started to take hold. Now, Indian outsourcing companies are forced to compete not just on cost but also on delivering exceptional CX. “This shift of focus to delivering superior CX is seen as a differentiator for companies competing within a global marketplace. Outsourcing to India will no doubt continue to be a popular option for years to come, but for India-based outsourcing providers, it is essential to pivot and adjust to highly customer-centric strategies and focus on CX if they want to remain competitive as this part of the outsourcing market continues to evolve,” says Ellspermann.
Another way that the outsourcing landscape is changing can be seen in the increased demand for higher-value services. This is being driven by the growth of technologies such as AI and machine learning. The days of companies wanting only call centers or back-office functions are gone. India has a good cost advantage, but it is no longer the only country in the running. As these technologies become more mainstream, businesses are looking for service providers who can help them not only build and deploy but also integrate and manage these new technologies. Companies competing in a global marketplace are in a race to provide information to customers in an ever-faster, more efficient, and cost-efficient manner. This will require outsourcing companies in India to become more tech-focused enterprises. When outsourcing to India, one advantage that buyers have always relied on is India's strong specialisation in the IT sector. “To this end, India does have an advantage due to its highly skilled workforce. As the push to provide these higher-value services continues, India is in a good position to upskill its outsourcing workforce to adequately meet this demand,” says Ellspermann.
The third way that the outsourcing industry is changing presents the biggest challenge to Indian outsourcing providers. Countries such as the Philippines, which has been in the outsourcing business for many years, are having significant success in winning contracts from companies in North America and Europe.
“Like India, the Philippines offers significant cost advantages, but its primary advantage is the success of its voice-based contact centers. In this segment of the outsourcing sector, the Philippines has been the clear leader since 2010,” explains Ellspermann. In fact, many of India's largest outsourcing providers have shifted much of their voice-based outsourcing operations to the Philippines to diversify as a result of losing clients and business to Philippine-based companies. The Philippines represents significant competition in voice-based outsourcing largely due to the country's high degree of English proficiency, but also because the Philippines enjoys a cultural affinity with the US, which has been an attractive feature to US outsourcing buyers.
As the outsourcing landscape continues to evolve there will be challenges to India-based service providers, but there will also be opportunities. This is a result of the country's highly skilled labor and simply because outsourcing to India has always offered key competitive advantages to companies looking to outsource key business processes.