India has been maintaining the lead in off shoring run. Mainly in IT, the success story of big industry names has caught world’s attention. And India is looking forward to continue growing this lead in IT and repeat the success story in other sectors like automotive, communication, and pharmaceuticals.

In spite of all these good past, the clouds are gathering on offshore horizon. In the country’s most popular off shoring locations such as Bangalore and Hyderabad, rising wages and high turnover among engineers provide evidence that local constraint on the supply of talent already exists. And just as these bottlenecks are developing, other low - wage countries, such as China, Hungary and the Philippines, are gearing up to challenge India’s lead.

High rates of emigration among graduates of the top schools further depress local supplies of suitable talent. An estimation of about 40,000 IIT (Indian Institute of Technology) graduates, for example, have gone to work in United States, though India’s buoyant IT services sector is now said to be attracting many of them back. Another hitch is the fact that by and large the country’s domestic economy is still largely shielded from global competition, so only few older graduates or middle managers have the international exposure.

India’s off shoring sector, the world’s largest and fastest growing, is dominated by IT services, which plays a major role in the country’s overall economic growth. According to NASSCOM (National Association of Software and Service Companies); in 2004 - 05, the Indian offshore IT and business - process outsourcing industry will generate approximately $17.3 billion in revenues and employ an estimated 695,000 people. By 2007-08, that workforce will consist of about 1,450, 00 to 1,55,000 people and according to an estimation the industry will account for 7 percent of India’s GDP.

So to end of India’s off shoring run is not necessarily at hand. India has other attractive qualities beyond low wage professionals. In last 15 years of off shoring, the country has developed a stable of world-class IT services vendors that can save foreign companies the trouble and pain of setting up the offshore office by themselves. And it has a large supply of qualified talent in areas outside IT, such as R&D, finance and accounting, call centers and back - office administrators. This is a great advantage India has over other countries.

Still India’s leaders have to ensure that a company hunting for an off shoring location doesn’t turn to other countries: the government must not only adjust the country's educational policies to ward off the looming squeeze on talent but also invest more money in infrastructure. So far, offshoring has been largely a private - sector affair, and in some respects the lack of government involvement has been the secret of its success. But private - sector investment in air - conditioned offices, apartments, and shopping malls in offshoring centers has not been matched by public investment in airports, roads, and utilities — improvements necessary to enable the millions of people attracted to these locations to live and work more efficiently. From now on, government and business must work together if offshoring is to remain India's growth engine.

Improving India’s off shoring prospects:
How can India stay on top of the off shoring ladder? A number of longer - term policy actions must be taken if the country is to remain attractive to companies that want to move their operations offshore - and fixing those aspects of it’s notoriously week infrastructure that can hamper a company’s efficiency is just one. But in the short term the priorities of Indian policy makers and for senior mangers at companies seeking to offshore operations to India are the squeeze on IT and business-process-outsourcing talent in the off shoring hot spots and the looming general shortage of engineering talent.

Improve the Infrastructure:
To stay at the cutting edge of offshoring, India must invest a lot more in its infrastructure — and a lot faster. Government neglect of offshoring may arguably have been benign up to now, but continued neglect of the infrastructure would be a mistake. Only the state can mobilize funds for the airports, communications networks, and utilities that the whole economy requires for healthy future growth.

Move Beyond IT:
India's leaders should start trumpeting its advantages as an offshore location not only for IT but also for industrial R&D, engineering services, CAD - CAM services, medical research and for back - office functions. This year, the country recognized full product patents on pharmaceuticals. That should reassure international pharma companies, which had feared that any intellectual property they developed in India might not be protected sufficiently. In these new fields, where India offers the requisite talent but is far from having the dominance it enjoys in IT, it would do well to target global companies in the United Kingdom and the United States, which have so far been the pioneers in off shoring.

Move Beyond Off shore Hot Spots:
Wage inflation and high attrition rates in key off shoring locations are understandably making companies nervous about India's supply of talent. But these problems are confined to specific occupations and cities. To some extent, moreover, off shoring companies have created difficulties for themselves by crowding into the same places. Although clustering creates advantages at first, they soon dissipate if demand for talent overwhelms the supply and if infrastructure investments don't keep pace.

Policy makers should encourage companies to look for talent in cities that haven't been touched by the off shoring bandwagon, where cheap supply may well exceed demand. India has huge numbers of skilled graduates in disciplines other than engineering.

India's policy makers must make a priority of helping companies to avail themselves of the country's untapped pockets of supply before too many more of them discover the charms of other off shoring locations. The government may, for instance, have to build airports in less well - known cities and help them with their marketing. Companies exploring these second-tier cities could consider telecommuting as a way of gaining access to additional employees or offer housing deals to get more graduates to move.

Role of niche players in building outsourcing trend:
Recently, very niche players concentrating on a smaller sector of market have evolved in the offshoring business. Engineering service, CAD/CAM service and other R&D service providers for manufacturing sector have shown up in the radar of offshoring. According to a survey, these niche players are expected to play an important role in building the offshoring future.

Since these players are very specialized in particular business or service, they can offer a better ROI (Return on Investment) to multinational companies. The domain knowledge and process knowledge these specialized players have developed is unmatchable and some times it is perhaps the most attracting and favoring feature while deciding an offshore deal.

India has a clear advantage over the rest of the countries in these specialized markets. And the success rate with offshore is high in these sector as these niche players have developed a delivery model, which has evolved over the years. World class process and excellent domain expertise will make sure that the offshoring becomes a success in this niche market segment. Rather, this is the great advantage these companies have over rest of the IT and business – process - outsourcing companies in India.

Thanks to the dynamism of India's IT services, the country is the world's preeminent offshoring destination. But other low - wage nations are now broadcasting their potential as offshore locations, and demand will quickly exceed India's supply of talent suitable for international companies. To stay on top, India must not only produce more top - quality engineers but also improve the suitability of other graduates. Finally, it has to show companies the depth and quality of its talent in areas other than IT — especially R & D and back - office work in industries such as finance and accounting.

Santosh Kotnis
Fort Collins, CO, USA.
santosh_kotnis@yahoo.com