India is the leading country for offshore outsourcing. The offshore outsourcing industry started in India and it has be able to grow the IT and BPO export sector to $47 billion and capture more than half the offshore outsourcing industry. That is not to say that India does not have challenges or is the best location for every offshore outsourcing effort, but it has an unparalleled history and size.
The Americas and Europe are the largest customers for the Indian outsourcing industry and account for 60 percent and 31 percent respectively of IT and BPO exports. The largest vertical sectors are financial services (41 percent), high-tech/ telecom (20 percent), manufacturing (17 percent) and retail (8 percent). In 2009 the IT and BPO export industries employed about 2.2 million people.
IT and BPO services outsourcing first started in India in the mid 1980s. The large, English speaking, low-cost workforce was the main attraction. The industry grew rapidly through the 1990s aided by the dot com boom and IT upgrades to prepare for potential Y2K bugs. The 2000s saw similar growth with work moving to India in down cycles to help companies cut costs and in boom times to capitalize on the readily available talent.
The 2008-2009 global recession has had a negative impact on outsourcing growth in India, but the sector is experiencing a turn-around in 2010. Many US and European companies are still cautions about the speed or staying power of the 2010 economic recovery and thus are looking to maintain a low cost base in locations such as India. We expect IT and BPO outsourcing in India to bounce back to double digit growth rates in 2010.