By Staff Writer
There is no denying the fact that India is rapidly turning to be a global back office, a giant in the world of outsourcing and technology. Already a top destination for global corporations for their IT needs, expanding into business process outsourcing was predictable. With a strong outlook for 2009 even with the economic recession the Mumbai carnage could not be more ill-timed. Have the Mumbai bombings shaken the industry, triggered apprehension and created a serious threat to the future of outsourcing? The question is 'what are the impacts and the long-term effects?
According to Roy Ajeet, a Bangalore based executive and outsourcing expert, India is the hub of outsourcing. Many recent economic benefits in India are as a result of a rapidly growing outsourcing industry. The bombings obviously have an impact and Investors will rethink before establishing their companies here. In fact, India is faced with a greater problem than security - Securing its investments and keeping the investor confidence high. "If we have a secure country and a booming economy, investors will scramble for a piece of the pie" Roy concludes.
There are other political risks with heavy implications. The bombings will impact the political leadership of the country and can result in instability, creating a political and security vacuum. However, the implications of the bombings have not taken a toll on the Indian economy. After the blast, the 39-share index of the Bombay exchange was up by 3%. The pundits are surprised. At the same time, the Bombay stock exchange witnessed heavy trading in Infosys Technologies' shares, the second largest Indian outsourcing company. Pundits conclude it is difficult to predict investor perception as it is evident they are not evaluating their businesses in India or considering risks.
As one of the largest emerging markets, India is experiencing rapid growth and provides attractive opportunities to investors. Bhavik Parmar, an executive in an outsourcing company says "There is little to worry about. Most clients who outsource to India have their captive companies and they are looking at expanding their companies. At least 15% of what is outsourced by these companies is done in India." This is indicative of the investor confidence in the Indian economy and the immense opportunities.
India is the most preferred destination in Asia with a large trained workforce and opportunities unavailable elsewhere. The Indian political system, security apparatus and intelligence have been reliable and have been a shot in the arm to the economy. The types of investments available in India include outsourcing, back office processing, financial services, IT, Telecom and manufacturing especially pharmaceutical. European and American investors have benefitted immensely from these opportunities.
India, though well-poised, has to watch out for the slowly growing competition from emerging countries like Vietnam and Eastern Europe. These economies have invested into new technologies and enjoying the benefits. These destinations would shrink the Indian market share in the global outsourcing pie in key investment opportunities like outsourcing, back office processes, and information technology. According to Pradumna B Rana a Senior Executive at the Office of Regional Economic integration, "Asia and Eastern Europe are still far from reaching high production levels. Only India has been able to achieve a regional production level thus becoming a single market for large scale business process outsourcing." This gives India some breather before these emerging economies will achieve scale and turn viable competitors.
Despite the political and emotional impact the Mumbai bombings have had, the country continues to gain from the IT growth. More investors than ever are buying the India story. If not anything the bombings have companies drawing crisis management blueprints and establishing redundant facilities. Emerging economies trying to replicate the India model would need to create the environment and economies of scale before competing for the outsourcing market share. The outsourcing growth has not reached saturation and has many more years to go.
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