Indian outsourcing services maintain growth in recession

India’s role as a top player among outsourcing destinations has remained unchallenged for quite some time. In fact, AT Kearny has listed it at the number one spot on its Global Services Location Index – which ranks attractive offshoring destinations – since the list’s inception five years ago.

However, in recent years, there have been many who have questioned whether the country could withstand competition from other locations with competitive pricing and a specialized skill set.

Writing in Forbes last year, IT strategy consultant Sramana Mitra claimed that India has not been working hard enough to develop new technological products or expand its offerings – even as labor in the country grows more expensive.

"India, for all its glory, is still the world’s back office," she wrote, saying that outsourcing providers have become "complacent" and risk-averse as other nations with lower average wages improve their skills and look for new opportunities to market their services.

However, Mitra’s commentary was written before the current recession sent the global economy into a tailspin. As more businesses look for ways to adjust their business models and cut costs to survive in a turbulent economy, it appears that India may be ideally placed to benefit.

At first glance, it may seem like the recession has been detrimental to the country’s outsourcing sector, as so many of the large U.S. companies that used these services – particularly those on Wall Street – have been suffering financially.

An updated report from analyst Gartner forecasts that spending on IT outsourcing worldwide will fall by 6 percent this year, higher than its earlier prediction of 3.8 percent.

But even as global spending declines, Indian outsourcing is still projected to be worth $47 billion in 2009, according to figures from Nasscom.

And Reuters reports that the top software services companies in the nation are expected to see a rise in profits when first-quarter results are reported. Even though growth in the country has slowed, it is still taking place.

In particular, India seems to be taking advantage of the recessionary desire of many U.S. and Western European countries to find cost savings quickly, on a short-term basis rather than through a long-term infrastructure change.

Larger companies are leading the way. In March, JP Morgan Chase announced that it would increase its outsourcing to India by 25 percent in 2009 so that it is spending nearly $400 million in the country.

Small and medium-sized firms are also taking advantage of the opportunities for cost savings. J. Brandon Black, president and CEO of the Encore Capital Group, told the New York Times that his company is planning to expand its Indian workforce.

"The thing it boils down to is the supply of well-trained educated labor at reasonable prices is just too great to ignore," he explained. Black added that hiring the same caliber of worker in the U.S. would involve paying high costs for infrastructure and health insurance.

Similarly, the recession seems to have brought new types of businesses to market who are looking to outsource, according to the Times, which is prompting Indian employees to learn fresh skills that match with the different types of jobs available.

During much of the past decade, India has made its name by specializing in business process outsourcing and IT outsourcing – and its efforts in those sectors show little sign of slowing.

But meanwhile, savvy providers are looking at ways to take advantage of fresh markets. For example, the Associated Press recently reported on the efforts of Indian special effects companies to improve their skill set in order to ink outsourcing deals with major Hollywood studios.

Analysis from oDesk has also identified growth areas including R&D, equity analysis, tax-return processing and medical transcription. There are more than 27,000 Indian-based outsourcing providers currently registered on oDesk, charging an average of $14.49 per hour.