India’s Offshore Industry | FTI Consulting

India’s Offshore Industry

A Disruptor Getting Disrupted

Corporate Finance & Restructuring | Telecom, Media & Technology (TMT)

November 14, 2018

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Background

Over the last 30 years, India has put itself on the international business map by offering and scaling low-cost, low-end IT services to global enterprises. Immediately after 2000, “India Inc.” emerged as a disruptor, creating an alternate sourcing and delivery model by reducing “back-office” costs and taking tactical jobs offshore. These jobs are now prone to disruption, with most involving routine functions that are candidates for automation and new technologies, such as robotic process automation (“RPA”), chat bots and self-repairing code, which largely negates the value proposition of cheap labor from a low-cost destination that India Inc. has sold the Western world for three decades.

Historical Context

The economy of India, much as the country itself, has undergone vast changes over the last three decades, one of which is becoming a huge, diluted talent pool of IT-related engineers. The seats offered in engineering colleges today are nearly 27X what they were in the 1990s, as India churned out engineers to fulfill the rapid demand of tactical jobs from developed markets moving offshore. This had significant impact on workforce quality while scaling talent pool. In any professional service business, you cannot attract top-quality clients and jobs without the best talent, but you can’t attract and retain top talent without those top-quality jobs.

This dilution of workforce quality also created a gap in the mindset of the IT professionals in India, as most people were trained to execute processes, not to develop cutting-edge products. As a result, India’s offshore model hasn’t produced an Apple, Google or Facebook over the course of the last 30 years.


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