It has been revealed that the ITO industry is on the up, despite difficult economic times. Worldwide IT outsourcing (ITO) grew by 7.8% in 2011 according to a report by analyst firm Gartner. Spending on ITO in 2011 reached $246 billion, compared to $228.7 billion in the previous year.
Unsurprisingly, it seems that cloud-based applications stimulated the growth, and consequently, because of its open source platform, offshore clients have been able to benefit: “Indian-based IT services providers and providers rooted in cloud-based services delivered the highest growth rates in 2011,” said the report.
So why is India in particular the offshore destination of choice? India rose to prominence in the late-90s when it was used to find a quick-fix for the millennium bug. The trend for outsourcing lower value, repetitive IT processes continued in the early years.
Cynics may suggest that India’s main attraction as an offshore destination is its low cost of labour. However, this is not sustainable for the industry, as India is expected to lead salary increases in Asia/the pacific. Instead, Indian outsourcers look to differentiate themselves through innovation.
Sunil Munsif, Vice President, Application Lifecycle Services of Capgemini UK Plc said: “Over the past five years, India has focused on going up the value chain and western clients now recognise India’s contribution to economic performance extending beyond managing expenditures. India now plays a role in reducing enterprise costs, not merely with cost cutting but by changing business processes, workforce practices and information use.”
Indian outsourcers have also benefited from delivering the infrastructure to allow innovation to flourish. Munsif stated: “Movement towards SaaS and Cloud computing, shared services and more selective outsourcing are also taking firmer shape as near-term priorities to address constrained budgets. The big focus is on delivering innovation through a variety of means including industry-specific Centres of Excellence in Indian and delivering high-end consulting skills from India.”
Particularly through these Centres of Excellence, it can be seen how India is investing in the skills of its workers, and providing them with the tools to deliver innovation. On the other hand, the UK is some way behind exemplified by poor IT course participation rates. However, plans to reform the IT curriculum, which Education Secretary Michael Gove described as “dull and demotivating”, are already in place, with a new regime set to start in September 2014, as only 0.5% of all A-Level students taking the course in 2011.
It soon becomes clear that India have benefited by differentiating themselves through innovation and providing their workers with skills required to do so. Hopefully this can also be the case in the UK.
