The Future Of Outsourcing In India

What is the future of outsourcing in India? Should you plunge into it or not? In this post, we will talk about the future of outsourcing in India: in terms of revenue, process enhancement and growth.

Do you know that India holds 65% of the global BPO and IT outsourcing market? The thriving outsourcing market in India was valued at 5,649.47 Bn in 2019 and is expected to reach INR 8,830.14 Bn by 2025, growing at a CAGR of 7.25%.

Apparently, it will grow in future in terms of revenue, but what are the operations? Business functions? Technologies? Though India has retained its position as the premier outsourcing hub globally, security has always been a significant concern. Hopefully, there will be some significant tech upgrades in the evolving outsourcing market in India.

Here is a quick overview of how the future of outsourcing in India would look like. Let’s have a look at the emerging trends, challenges and opportunities.

Table of Contents

Forthcoming Trends to Affect the Future of Outsourcing in India

As the outsourcing industry reopens after a significant pause caused by the Covid-19 pandemic, numerous trends contribute to a flourishing future.

Market leaders assume that costing has always been a primary issue, but they will continue to find new ways to cope with these. However, the pressure will gradually shift from the mediators to the service providers.
With the emergence of new compliances and regulations, customers would be looking for a more standardised process. Hence, the future of outsourcing in India will be more focused on performance than pricing.
Many small businesses and startups are fascinated by increased efficiencies, improved quality control and minimised back-office overheads and cost. This trend will continue and play a crucial role in shaping the future of outsourcing in India.
Shared or standard services were not acceptable in the outsourcing industry earlier, but the trend has changed. Share solutions, indeed, have been proven to reduce costs and increase efficiencies.
Analysts have suggested that India will soon become a powerhouse for offshore staffing as well.
While Bangalore and Mumbai are leading outsourcing destinations, Noida and Gurugram will be shaping the future of outsourcing in India.
Studies have suggested that the adoption of cloud-based services will be increased because they are cost-effective.
The India outsourcing market will gradually shift its focus from IT Outsourcing (software, app, website development, digital marketing, etc.) to manufacturing and staffing.
Healthcare and IT outsourcing startups will continue to strengthen the future of outsourcing in India.

India’s Current Contribution to Global Outsourcing Industry

Considering India’s current contributions to the world’s outsourcing industry, India holds 55% of global IT outsourcing shares. Low-wage workforces, pricing flexibility and a large talent pool, make India an ideal outsourcing destination in the world.

In recent years, IT software and service companies have widened the Indian outsourcing market’s shares from 55% in 2015 to 65% in 2021. However, India still stands apart for its vast talent base, low-cost employees and efficient solutions. Apparently, the future of outsourcing in India is bright. Being a powerhouse of skilled staff and quality services, offshore staffing will play a prime role in outsourcing in India.

Let’s gauge through the opportunities India will be having in the next few years.

Opportunities for the Indian Outsourcing Market

The Indian outsourcing industry has witnessed phenomenal growth in the past years. As markets around the world are striving to cut costs and bring efficiency, India has become the preferred choice for genuine outsourcing services. With a larger talent pool – doctors, software developers, digital marketers, designers, and engineers, etc., India will soon tap into the most anticipated opportunities in the outsourcing industry.

India will become a hub for knowledge services like KPO, Content, Medicine and Design & Development.
With about 20 lakhs lawyers, India will become the first choice for outsourcing legal services.
The future of outsourcing in India is flourishing in the FAO market as numerous Fortune 500 companies are already outsourcing operations in India with companies like IBM, ACS, TCS, etc.
India already has a big market in pharmaceuticals, clinical research and medical billing & coding outsourcing, but the availability of high-quality and secure data management will bring more efficiency.
Another vertical which might prove to be fruitful for the Indian outsourcing market is Infrastructure Management Services.
Studies have also suggested that India might become a dominant player in Product Engineering and R&D, which is expected to reach $2.3 trillion by 2030.

Challenges for the Indian Outsourcing Marketing

As the industry is in the evolution phase, the future of outsourcing in India won’t be convenient. While new players are coming into the outsourcing market and existing ones are expanding their horizons towards other verticals, the competition will eventually increase, demanding exceptional solutions. Some of the most anticipated challenges for the Indian outsourcing markets are appended below.

As the industry grows, it will need to focus and invest in its infrastructure, an integral area where India lacks perfection.
Due to rapidly changing labour laws in India, outsourcing companies will have to shift to Tier-II cities, which might cause issues with talent acquisition.
Though India continues to evolve its services as a leading outsourcing destination, it will get tough competition from Thailand, Malaysia and other Southeast Asian Countries.
India’s competitiveness from Southeast Asian countries continues to grow due to lower labour and operations costs there.
Political turmoil might also hinder India’s growth as a global outsourcing leader.

Expansion of Indian Outsourcing Industry Beyond BPO

With increasing concerns like lack of control and performance, companies are shifting their focus from outsourcing to hiring offshore employees. If we talk about the future of outsourcing in India, the country will soon become a preferred option for offshore business services, such as dedicated virtual employees.

Considering its financial activeness and availability of staff and skills, it will overreach Hong Kong, Panama and other current players in the market. But to align with the anticipated future of outsourcing in India, the country will have to invest a lot in developing secure servers and resolving data security bugs.

What Does the Sixth Sense Indicate?

If we speak from our sixth sense, increasing cybercrime in India might hinder its progress as a thriving outsourcing destination. Since data safety has always been a significant concern for business outsourcing to India, the country should look forward to adding the following solutions to its tech stack.