Business Trends in India

The trends of going offshore to outsource a variety of back-office functions is increasing, and particularly in India’s favor. Companies are finding that saving on labor by going offshore is not the only benefit. The additional capital allows for greater marketing to generate further sales, greater opportunity to innovate and launch new products, and an additional ability to target new markets. All this leads to significantly more profitability that without offshoring.

The following quotes are from:

The McKinsey Quarterly: Offshoring and Beyond
Cheap labor is the beginning, not the end

By: Vivek Agrawal, Diana Farrell, and Jaana K. Remes
The McKinsey Quarterly, 2003 Number 4 Global directions

• “More recently, businesses of all kinds have also exported back-office functions such as data entry, payroll processing, and call centers. Business-process offshoring is all the rage, and the hundreds of companies that have taken this route often cut their costs by as much as half.”

• “Many of the jobs sent offshore may be considered undesirable and lacking in prestige in developed countries yet are highly attractive in developing ones. So offshore workers not only cost far less but also are often more highly motivated, which means that they perform better. One British bank's call-center agents in India, for instance, process 20 percent more transactions, with 3 percent more accuracy, than their counterparts do in the United Kingdom.”

• “Business-process offshoring is still a nascent industry. By our estimates, in 2002 it was worth $32 billion to $35 billion, just 1 percent of the $3 trillion worth of business functions that could be performed remotely. Because of the significant benefits already being realized through offshoring, the market is projected to grow by 30 to 40 percent annually over the next five years…it will make offshoring an industry with well over $100 billion in annual revenues by 2008.”

• “By reaping offshoring's full potential, companies will find that their new, lower-cost structures open up a variety of opportunities to boost revenue growth. These opportunities will often far exceed the annual cost savings. Some companies, for instance, can now chase delinquent accounts receivable they formerly had to ignore: one airline carrier is capturing $75 million in previously lost receivables on top of the $50 million it saves each year by operating its accounts-receivable department in India.”

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