In contemporary business world information technology outsourcing has become a wide-spread phenomenon all around the globe. The main reason for increased IT outsourcing is the number of advantages that are commonly recognized by companies and governments. In order to achieve the companys goals and achieve customers satisfaction, information technology outsourcing in India has become a successful business strategy for a variety of reasons. India is an attractive destination for information technology outsourcing. In fact, the host enterprises can fulfill their strategic objectives in a cost-effective manner by transferring IT goals to India locations. Companies can concentrate on their core competencies, the risks can be shared, and the value can be added. The Indian authorities support the organizations that provide information technology outsourcing through creation of IT special economic zones and IT parks. The mutual cooperation process ensures that business people and managers receive more benefits than ever before by outsourcing in India.
Indias Demand for IT Outsourcing
According to the research, India lacks skilled and experienced IT professionals; the rates of Indian workers are considerably lower than in the rest of the world (Rivard & Aubert, 2007). Thus, India is a country that is at the developmental stage of IT outsourcing. At the same time, the process of outsourcing is important for such overpopulated country like India. Admittedly, the Indian government is stable and supportive of the incoming investors, and views IT outsourcing as a top priority for the economy. Ray (2007) claimed that international companies transfer their software needs to India. India attracts businesses from the developed countries because the educated Indians are fluent in English, which makes communication and interactions with the hiring companies easier. Indian information technology outsourcing helps to hire skilled and talented professionals who are experienced in the latest IT trends. These professionals can provide companies with the newest IT tools that can assist companies in achieving their objectives and design appropriate planning solutions to IT-related business issues.
Many international economists and multinational corporations understand that India needs an appropriate infrastructure and high-end technology investments. However, modern business requires web development and software for the most attractive price. Moreover, in order to achieve success of a company and keep a competitive edge, IT requirements need adaptation and assimilation. Thus, India is the leading country for corporate outsourcing due to the quality and price of the services Indians provide. Currently, the Indian economy is one of the largest emerging economies in the world. Together with Brazil, Russia and China, India has the large impact on the global economy. The gross domestic product, measured by current exchange rates, was on the level of $1.2 billion in 2008. However, when calculating GDP based on purchasing power parity, the economy is estimated to be worth about $3.4 billion. In addition, India is the second of the top countries to attract outsourcing (Rivard & Aubert, 2007).
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IT outsourcing in India started in the 1980s. The first reason is the number of educated people who speak English, thus IT outsourcing has become attractive to many international companies. The second reason why IT outsourcing has become popular in India was the low cost of the workforce. Furthermore, by 1990s India has achieved a considerable growth in IT upgrades and the dot-com boom, which gave an opportunity to prepare for Y2K bugs. The beginning growth was established in 2000s. By using IT outsourcing, many Indian companies were able to capitalize on the professional talents and cut costs. However, the global financial crisis of 2008-2009 has had a negative impact on outsourcing situation in India. However, due to the current economic recovery and a turn-around in 2010, many European and American companies are looking to maintain a low cost base in India.
The most familiar model that addresses a constructed comparative advantage is Michael Porters Diamond of national comparative advantage. The framework was implemented effectively in India. The countrys authorities understand that many incoming companies can create new advanced factor endowments. The funding includes government support, investment in high-skilled labor force and development of technology by hiring expert employees, establishing a strong technology and knowledge base, corporate culture, and putting the competitive pressure on companies to innovate and invest.
Constructive Comparative Advantage
Ray (2007) noted that local firms become world leaders, and multinational corporations from around the globe set up local facilities to take advantage of the innovative atmosphere in India. As companies consider the role of location in enhancing competitive advantage, countries are becoming less relevant than local clusters to offering unique opportunities for success. Big emerging market economy like India begins to succeed in technology-intensive industries even while multinational corporations continue to invest in the developing nation. At the same time, many agree with economists who have speculated that if India can continue the current rate of growth, it will be able to out-compete the U.S. in the industries with Indian competitive advantage. Thus, the developed nations are threatened by the outsourcing success of India.
Some studies have shown that contracts could be used to manage efficiently various dimensions of relevant exchange in IT outsourcing (Rivard & Aubert, 2007). Indian authorities understand that the contractual elements underlying governance characteristics provide a way to maintain the professional relationships through a clear statement of the measurements, conflict arbitration, penalty and rewards, exit policy, and communication plan. The research asserts that many IT outsourcing projects in India have failed to meet expectations, especially when work is relocated to cut labor force expense. Therefore, in order to receive a constructive competitive advantage, an outsourcing organization should think in terms of hiring a partner, not just a service provider.
India is an attractive destination for information technology outsourcing enterprises. The Indian employees can fulfill the strategic objectives of the investing company in a cost-effective manner. The countrys authorities understand that international companies can create new advanced factor endowments. The strategies include government support, investment in high-skilled labor force, developed technology, and strong knowledge base. Moreover, the incoming enterprises invest in culture, government, and provide the competitive pressure for companies to innovate and develop. The Indian authorities give support to the companies that provide information technology outsourcing through creation of IT special economic zones and IT parks. The mutual cooperation process ensures that business people and managers receive more advantages from outsourcing to India.