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More than just backoffice: How Covid-19 is transforming outsourcing in India

By Sudeep Mishra

India remains the gold standard for outsourcing services. This has been true for decades now, with the main factor contributing to this outcome being its large English-speaking youth population. We are also a country known for its talented human resource pool with various skill sets, be it graduates or postgraduates. Despite emerging competition from Eastern Europe, Latin America, and the Asia-Pacific region, India remains the leader. Several of the largest firms now have a global presence with delivery centers across the world. Despite this expansion of competition, most workforces have a concentration of resources in India. It is important to mention that along with its demographic advantage, India has also emerged as a tech hub, which is at the core of innovation in the industry.

While outsourcing to certain other competing regions may be slightly more cost-effective, the corresponding value-addition and quality of service balance that India provides ensure that it remains at the top of the outsourcing industry, especially for high-end services. The sheer size of the talent pool has also made India attractive, with one able to scale rapidly without having to compromise on quality.

Outsourced service providers in India have been helping organizations for years in handling the core business and operational functions, and those who are already outsourcing to India have seen minimal disruption in operations from the COVID-19 pandemic. Before COVID-19, there still remained inertia in the workplace dynamic with decision-makers always preferring employees ‘down the hall’. While the benefits of outsourcing non-core services were well known, this barrier remained. This changed with Work from Home as suddenly a new paradigm of distance was widely accepted due to a lack of choice. In turn, the significant barrier to sizable demand and growth of the addressable market being taken down opened the floodgates to the industry. Very quickly, those who started outsourcing were able to enjoy the benefits of cost, flexibility, best practices, and were able to overcome various human resource and capacity challenges.

Starting in late 2020-early 2021, there had been a surge in demand for outsourced services. What started out as a larger and wider acceptance of the industry quickly turned into what was a perfect storm of sustained demand that helped expand the market and create a myriad of opportunities. Along with a changed mindset and openness to outsourcing, there also ended up an attrition problem at the client’s end and a turnaround in global economies. Coupled with the difficulty of training and recruiting remotely at scale, and firms were looking to alleviate their HR problem. To add to this, the liquidity created by federal banks easing to support economies resulted in a rush of excess investable cash within the financial services industry. Firms that had been around for over two decades saw their assets under management double in the space of two years. All of the above factors resulted in a boom for the outsourcing industry, and firms across the spectrum, at the low and high end, have benefited in not just a pull-forward of demand but a permanent reshaping of the industry that is now seen in a new light.

The scenario that the pandemic created and that urged us to change will remain even after the world opens up completely. We are already seeing this unfold as most companies are back in the office, and there are no signs of any let-up in demand. The evolved mindset with an experience of the new world has expanded the market opportunity permanently, essentially pulling forward the lever of transformation a couple of decades forward.

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