February 11, 2005

Over the past few years, India has been known to be an offshore R&D center for various outsourced IT activities, which Indians are now able to perform at a much lower cost than their counterparts in the western world.

It is this promise of cost savings that has prompted many software companies (think IBM, SAP, Oracle, Microsoft, &c.) to locate development centers in India while end user businesses in North America and Europe have relocated support, programming, and other such activities to India.

India is now ready to graduate from this role and move up the global IT chain. This, at least, is the message that came out of the recent NASSCOM (National Association of Software and Service Companies) forum in that country.

At the forum, NASSCOM disclosed that Indian IT grew 34 percent in 2004, with a total value of $21.5 billion.

IT services and software represented 60 percent of that, and business process outsourcing (BPO) came in at 18 percent. NASSCOM expects Indian IT to grow another 30 percent in 2005.

What's interesting is the rise in BPO share and, also, the rise in sophistication and adoption of native Indian e-business applications.

Analyst Lance Travis of AMR Research, who was at the forum, made the following observations about these trends:

   1) "Several of the companies are investing in building their own Intellectual Property (IP)... The service provider starts with its prebuilt, domain-specific offering, and then customizes and completes the application as part of a services contract."

   2) "In addition to IT professionals and business analysts, India Inc. is growing its electrical, mechanical, and process engineering abilities and delivering extensive outsourced product engineering services."

   3) "Rather than just servicing the call center and transaction-processing BPO markets, [Indian companies] are using medical professionals, accountants, statisticians, and scientists to create high-value BPO products."

Ultimately, these kinds of developments allow NASSCOM and affiliated companies to dispel the myth of India Inc. as a kind of IT sweatshop surpassed in quality by, say, U.S., Russian, and other talent.

It is now legitimate to look at India as a BPO and application provider in its own right, and NASSCOM showcased several major multinationals that have done so already.

Source: Line 56