An interesting Fortune magazine article on the Indian outsourcing movement
makes this wonderful comment, "That is what the world has come to. An
ambitious young woman from a nation that spent the first four decades of its
independence floundering in a semi-socialist economic miasma is lecturing
Americans on capitalism in the language of a cheesy American business
bestseller. And she’s doing it at a slick night spot on a road named after the
saintly ascetic who won India its freedom. Isn’t it magnificent?" For
those of you who have not read the article, this is about a young IT
professional being interviewed in a pub on Bangalore’s MG Road.
More important, this is the great Indian paradox that might confuse the
Western observer but is all so typical of the way all of us live and work. One
may carp that India is popular because of its low cost as compared to the US and
most BPOs are doing "bums on seats" call center work rather than truly
migrating business processes to India, but there is no gainsaying the fact that
what we have achieved so far has caught the attention of the entire world and
the war of who will become the offshore back office for all the world’s
services is there for us to win or lose.
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A lot of people have asked the question—is this Indian dream run
sustainable? There is no reason why not, since the purchasing parity with the US
is still at a healthy one to five ratio, the government has done a good job of
controlling inflation and interest rates between the ministries and with the
industry is the order of the day. And as more and more IT Services and BPO firms
move to smaller towns like Nashik in Maharashtra, Gwalior in MP, Kochi in Kerala
or even Ranchi in Jharkhand, the availability of manpower at lower wage
expectancy levels in these towns will enable us to sustain the economic value
proposition over this decade without any problem.
Does this mean that the US economy will suffer as a result of this movement
of services jobs to India? Far from it, as a recent study by NASSCOM shows.
While the estimated software and services exports to the US will be over $8
billion in the current financial year, the savings to the US economy by
offshoring to India is itself going to be over $10 billion. Add to that the
spending, social security and income tax payments by the industry’s onsite
professionals in the US and imports at an estimated $3 billion of hi-tech
equipment from the US and the math is encouraging—the benefits to the US are
double the Indian export figure to that country.
And if the numbers aren't enough, look at the list of qualitative benefits
that US companies continue to enjoy by working with Indian firms—higher
productivity, improved operational efficiencies, multi-skilling and catering to
peaks and troughs in demand for resources and of course the plethora of
commercial models—time and materials, volume discounting,
build-operate-transfer options etc—all these add up to significant gains for
US corporations helping them to stay far ahead of their counterparts around the
world.
Back to numbers and a study by the Mckinsey Global Institute reveals that
every dollar offshored to India delivers thirty three cents of value to India,
brings savings of fifty-eight cents to the offshoring company and nine cents of
additional benefit through venture profits and sale of goods and services.
Finally, new value to the extent of forty-five cents is created by re-employment
of US labor in other tasks thereby adding up to a global pie of a dollar and
forty-five cents—there can be no better motivation to continue and increase
the pace of offshoring.
Did somebody say—where are the opportunities for re-employment for American
workers? In education, healthcare, professional and business services, trade,
transportation, utilities, leisure, hospitality and of course traditional
construction and manufacturing activity, where a large portion of jobs cannot
and will not move offshore. The point to be noted is that the global offshoring
model has some limited short term impact but very substantial long term
sustainability.
Ganesh
Natarajan
The author is deputy chairman & managing director of Zensar Technologies
and chairman of Nasscom’s SME Forum for Western India