India is the leading country for offshore outsourcing. The offshore outsourcing industry started in India and with its large, English-speaking population it has be able to grow the IT and BPO export sector to $47 billion and capture more than half the industry. That is not to say that India does not have its challenges or is the best location for every 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% and 31% respectively of IT and BPO exports. The largest vertical sectors are financial services (41%), high-tech/ telecom (20%), manufacturing (17%) and retail (8%). In 2009 the industry employed about 500 million people. The 2008-2009 global recession has had a negative impact on growth but the sector is doing better than most. US and European companies are looking to cut costs. Many companies have asked for cost reductions from existing partners, but at the same time they are moving more work to low cost countries. The Indian industry's growth rates are down from 25%+ prior to the recession, but are expected to be in double digits this year and could be as high at 15% to 18%. |
India is the largest democratic country in the world. It is second only to China in terms of population with 1.1 billion citizens. Though it has enormous economic and social problems, it is a major global power. India’s demographics and history have positioned it well to take advantage of the new global services market. Most of the subcontinent was annexed by the British East India Company in the 18th century. While colonization had many evils, the act combined a number of previously independent nations and created the foundation for a massive national economy. Second, British colonization brought the English language which has become the global language of business and a huge advantage for India. Currently, the Indian economy is one of the largest emerging economies in the world. It is commonly grouped with Brazil, Russia and China as part of the BRIC countries that are having an increasingly important impact on the global economy. The gross domestic product, measured by current exchange rates, hit $1.2 billion in 2008. However when calculated using purchasing power parity, the economy is estimated to be about $3.4 billion, second of all top outsourcing countries. |
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Population:
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Total Population: 1,156.9 million |
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Economy:
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Gross Domestic Product: 1,217.5 billion US dollars |
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Gross Domestic Product (PPP): 3,388.5 billion international dollars |
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Per Capita Income:
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Gross National Income Per Capita (Atlas Method): 1,070 US dollars |
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Gross National Income Per Capita (PPP): 2,960 international dollars |
India is a highly cost competitive location. Wages, the largest component of costs, can be one tenth to one half those in the US. However, the rapid growth of outsourcing to India has lead to significant wage inflation especially for higher skilled employees. Emerging locations such as the Philippines, Pakistan, Indonesia and Egypt have some less expensive resources, but the differences are not always significant. Employee Compensation Employee compensation is the largest component of cost for any outsourcing operation whether it is web development, application maintenance, human resource outsourcing or customer care. A typical project will include a number of junior resources, and some high skilled senior oversight and project management. Junior resources typically provide the largest cost savings and India is no exception. In the information technology area, software engineers/ web developers with 1-4 years experience are about 11% of those in the US. Annual salaries vary across locations and skill levels, but typically range between 270,000 and 370,000 rupees or $5,500 to $7,500 US dollars. Senior, more experienced resources are in shorter supply in India and thus the difference in cost is not as large. Senior software engineers/ web developers with 10 to 20 years experience are about 43% the cost of comparable resources. Salaries vary more dramatically than junior resources and can range from 960,000 to 2,300,000 rupees or about $20,000 to $48,000 US dollars. Similarly, IT project managers with 10 to 20 years experience are about 40% of comparable resources in the US and salaries range from 1,150,000 to 2,000,000 rupees or about $24,000 to $42,000 US dollars. Salaries in the BPO sector are comparable. Junior voice and non-voice resources are about 11% to 15% of their US counterparts. At the more senior levels, high skilled BPO employees and operations mangers command about 19% to 25% of their American colleagues. Real Estate and Taxes Other common outsourcing costs are also typically lower in India, but there are a few exceptions. Office occupancy costs vary across cities and from central business districts to the suburbs, but most Indian outsourcing operations will have lower occupancy costs than similar US operations. However, high end real estate in major Indian cities can be more expensive than similar office space in the US. For example, office occupancy costs for grade A, prime location office space in Mumbai, the financial capital of India, goes for $131 per square foot per year, more than double that of downtown New York. Costs in Bangalore are much more reasonable and range from $35 per square foot in the central business district to $18 in the suburbs. Taxes in India can be high and companies pass these costs on to their customers in the US and Europe. Corporate tax rates are about 34%, higher than many other outsourcing locations. Indirect taxes i.e. value added taxes (VAT) are relatively low at 12.5%. However, India has a range of other taxes that small businesses must bear and the effective rate is almost 65%, worse than almost all other outsourcing locations. |
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Index: 9.4 Rank 11 IT Salaries: |
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Software Engineer/ Web Developer: 11 percent of US |
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Sr. Software Engineer/ Web Developer: 26.9 percent of US |
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IT Project Manager: 36.3 percent of US |
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Index: 9.8 Rank 11 BPO Salaries (Non-voice): |
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Junior BPO Resource: 11.1 percent of US |
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Skilled BPO Resource: 18.8 percent of US |
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Operations Manager: 25 percent of US |
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Index: 9.6 Rank 11 BPO Salaries (Voice): |
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Customer Service Representative: 14.9 percent of US |
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Sr. Customer Service Representative: 24.5 percent of US |
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Index: 5.5 Rank 11 Real Estate: |
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Office Occupancy Cost (CBD): 75.3 US$/sf/yr |
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Office Occupancy Cost (Suburbs): 31.5 US$/sf/yr |
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Note: Occupancy costs are an average across the cities of Mumbai, New Delhi and Bangalore. |
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Index: 5.4 Rank 11 Taxes: |
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Corporate Tax Rates: 33.9 percent |
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Indirect Tax Rates: 12.5 percent |
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SMB Effective Tax Rate: 64.7 percent |
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Index: 6.5 Rank 11 Workforce: |
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Total Workforce: 523.5 millions |
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Index: 7.1 Rank 11 Outsourcing Sector: |
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Total Offshore Outsourcing (IT & BPO): 47,000 billion US dollars |
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Exports of Computer & Information Services: 49,378.9 million US dollars |
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Exports of Misc. Business Services: 16,655 million US dollars |
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Index: 3.0 Rank 11 Basic Education: |
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Adult Literacy: 65.2 percent of population |
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Index: 2.9 Rank 11 University Graduates: |
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Annual University Graduates: 2,700 thousands |
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Annual Science & Technology Graduates: 441 thousands |
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Index: 0.5 Rank 11 Technological Readiness: |
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Internet Access: 6.9 users per 100 inhabitants |
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Broadband Internet Access: 0.4 subscribers per 100 inhabitants |
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Index: 6.1 Rank 11 Economic Competitiveness & Stability: |
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Economic Competitiveness: 4.3 GCI score |
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Macroeconomic Stability: 4.2 GCI Score |
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Index: 3.2 Rank 11 Infrastructure: |
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Quality of Roads: 3.1 index (1-7) |
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Quality of Electric Supply: 3.2 index (1-7) |
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Mobile Phone Penetration: 29.4 subscriptions per 100 inhabitants |
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Index: 7.1 Rank 11 Labor Market Efficiency: |
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Rigidity of Employment: 30 index (0-100) |
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Cost of Firing Employees: 56 weeks of salary |
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Index: 2.8 Rank 11 Regulation: |
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Overall Ease of Doing Business: 133 rank (1-183) |
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Complexity of Starting a Business: 30 days to register a start-up |
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Complexity of Paying Taxes: 271 hours per year |
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Index: 3.4 Rank 11 Corruption: |
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Corruption Perceptions: 3.4 CPI index |
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Index: 3.1 Rank 11 Legal Protection: |
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Procedures to Enforce Contracts: 46 number |
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Time to Enforce Contracts: 1,420 days |
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Cost to Enforce Contracts: 39.6 percent of claim |
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Index: 3.7 Rank 11 Intellectual Property Protection: |
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Intellectual Property Protection: 3.6 index (1-7) |
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Software Piracy: 68 percent |