"Outsourcing is a bubble in India"

BANGALORE: Even as India enjoys its status, as the most preferred outsourcing hub, critical but neglected issues continue to pose a threat to its growth. In the second edition of the annual 'India Outsourcing Summit 2004', Michael F Corbett, CEO of Michael F Corbett & Associates Ltd., and popularly known as the 'outsourcing guru', shares his views with Sigi Achappa of CIOL. Excerpts of the discussion.

What is the effect of outsourcing on global economy? How does it help an economy that is in a state of flux?

In a way outsourcing is driving the global economy. Outsourcing helps in the faster introduction of products, it builds communication and interactivity across borders, and underlying all this is the spread of Information Technology.



Outsourcing itself is a huge economic engineer and an important economic contributor. Outsourcing creates jobs, increases opportunities for shareholders and investors. And secondly, it helps the customers of outsourcing to grow and shrink businesses. It provides more flexibility and allows the service provider to target more customers across industries. It also acts as a 'shock absorber' for the highs and lows of businesses, in turn providing more stability.

Probably never. It is a huge challenge. To do this India should not allow itself to have a single value centered around 'cost'. It has to go beyond that and increase domain knowledge and expertise within individual industries. It has to anticipate and align itself with the customers' needs right across the customer chain.

Experience is one factor. India has been providing outsourcing services for the past two decades. Secondly, familiarity with Westerner's way of doing business more because of its colonial influence. Then there is brain power — the number of highly qualified professionals for R&D and financial analysis, a field which has not been extensively tapped yet. If you look up the value chain, new avenues keep opening up for outsourcing — the latest of which, is in the area of drug testing, because of the availability of the number of people, who have not been tested on before.

Yes, it is a bubble from the standpoint that the growth rate which India has witnessed in the past 5 years ( 70% CAGR as according to figures indicated by STPI director BV Naidu) will slow down. Such a high growth rate cannot be sustained, it will get stabilized. The sector will plateau in about 2 years time. One of the reasons for this is competition. The other is technology- as more processes get automated there will be lesser need for manual intervention. Even in programming, automating developing processes will reduce the need to outsource. Another factor will be staffing. According to McKenzie research reports, India will have a staffing shortage by end-2006.

But, yes even in the plateau stage, India can expect a growth rate of 15-20 percent.

Quality is the No.1 issue. The delivery of a service/product has to improve. There are too many instances of long transition periods. Another is integrating and strategic planning along with the customer. One has to align work processes along customers' needs and business and aim to become a seamless partner. The other issues would be Security, IP and Privacy. Some of this is being tackled, but India does require legislation on Privacy.

After the presidential election, but it will not go away. It will remain as long as the economy is sluggish. The answer is to create more jobs to absorb the ones that are lost in these countries. Earlier the knowledge worker was king, now with outsourcing, he is suddenly out of job. The answer to this lies in the creation of wealth. The US mindset will have to change to the creation of wealth and not dwell on the loss of jobs.