Thursday, July 01, 2010

History of Emergence of Outsourcing to India Companies

The concept of outsourcing came into existence only after people started realizing the effectiveness of competitive advantage theory disseminated by Adam Smith in his book named “The Wealth of Nations”. This theory explicitly propagated how outsourcing work to countries with cheap labor rates can benefit the companies working in developed countries with high labor rates. In recent times India is considered one of the biggest outsourcing destinations and innumerable IT companies have developed just by taking up outsourcing to India projects.

Next thing you would be concerned about would be why outsourcing to India when many other countries with cheap labor rates are available. India was very quick to pick up the concept of outsourcing and hence started making efforts that would pull foreign countries to outsource their work to India. Private companies were given access to providing services especially telecom services where previously government held monopoly. This initiative brought the IP telephony to India which made it really easy and cheap to talk to people in foreign countries.

Due to this initiative many foreign countries started considering India for outsourcing work. Initially outsourcing to India projects were related to medical transcription which later went on to include billing, customer service, data entry, software development, internet marketing,  SEO and the chain virtually has no last ring. Most of the parent companies established sister companies in India to offshore their work.

However with the advent of hundreds of companies taking up outsourcing to India projects foreign countries found these companies to be more beneficial then establishing their own sister concerns in India. This would benefit the parent companies as they would not have to spend money on developing and maintaining infrastructure. For control most of the outsourcing countries allowed a member from the parent country to work with them so that they can have total control on the operations alternatively they can also visit the companies on regular intervals to see how everything is going on.