India feels less vulnerable as outsourcing presses on

In fact — because of the pressure on companies, and even governments, to reduce costs — many outsourcing businesses are booming. And a mood that was deeply uncertain just six months ago has turned much more optimistic.

Encore Capital Group (a debt collection company) President and Chief Executive J Brandon Black, said he planned to increase his work force in India in the next few years, in part because of the tough economic times.

In India, “we’re hiring college-educated people.” The company is not doing that in the United States, where it would incur greater infrastructure and health care costs.

“Outsourcing is here to stay,” Black said.

Some of America’s biggest companies continue to invest in India, even as they trim costs at home. Many in India say they believe that demographics are on their side in the long run.

Aging workforce

“In most developed economies, the workforce is aging,” said Ranjit Tinaikar, a partner with McKinsey, a consulting firm. The health care costs associated with employing those Western workers will continue to increase, he said, creating a “big opportunity” for India.
A decade ago, McKinsey and India’s powerful information technology and outsourcing trade group, Nasscom, predicted that revenue from outsourcing by foreign companies would reach $50 billion in India in 2010.

Global crisis

The global economic slowdown has delayed that by three or four quarters — revenue is predicted to reach $47 billion this year.

And in April, Nasscom and McKinsey predicted that by 2020, outsourcing would yield $175 billion in revenue here. Growth will slow this year at many of India’s biggest outsourcing companies, however, because of the implosion of some of their largest clients: banks, mortgage servicing companies and Wall Street firms. But that does not mean revenue is no longer growing.

“People who have never looked at outsourcing before are saying they have to do it,” said Infosys BPO Chief Executive Amitabh Chaudhry. He expects his unit to grow 25 to 30 per cent this year, compared with 40 to 50 per cent in the past. “Our view is we start work onshore, then move it to Poland or Morocco, and then over time to India,” said Sachdev Ramakrishna, Director of Marketing for Steria, an information technology and outsourcing company. Steria is based in Paris, but one-quarter of its employees are in India, and it has offices in Morocco and Poland. “It’s like opening the tap in bits.”

New skills

Even companies based in once union-friendly countries like France and Germany, as well as once-flush Middle Eastern firms, struggling media companies and companies that have been taken over by private equity firms are looking to outsource.

Indian companies that relied on Wall Street and big banks for much of their business are aggressively learning new skills.

Matthew Fawcett, the General Counsel of JDS Uniphase, a fiber optics company in California, started looking at outsourcing some legal work to India two years ago and is now a UnitedLex client.

“When you run a legal department of a publicly traded company,” he said, “you care about cost and overhead.”

Patni Computer Systems, which employs doctors and nurses in Noida, is working with health insurance companies in the United States whose policies provide home care for elderly patients. Patni’s doctors and nurses call the patients regularly for checkups, and if the patient needs a physical examination, they call the insurance company, which dispatches a nurse.

“It’s a proactive measure, rather than reactive” said Sanjiv Kapur, the head of Patni’s outsourcing business, intended to prevent the patient from falling ill and winding up in the hospital. “It’s less costly for the insurance company.”