"Explain the role of ICT in the growth of international outsourcing." Use Bangalore, India
ICT stands for information, communication, and technology; it has allowed and plays an important role in the growth of international outsourcing, which is the idea of shifting company functions to elsewhere and paying an outside firm to manage them. When outsourcing was first introduced in the 1970s, manufacturing companies dominated the market, whereas now the market is shared by small to big-sized businesses and incudes low-technology to high-value work. The essay will discuss ways ICT has boosted the growth of international outsourcing with the support of the case study Bangalore, India.
We can claim the importance of ICT by looking at the criteria used by A.T. Kearney to rank the top outsourcing locations; it is subdivided into three aspects - financial attractiveness, people-skills and availability, and business environment, each of them involves the level of ICT. International telecom costs and median compensation costs for call center representatives, BPO analysts, IT programmers and local operation managers are judged in the view of financial attractiveness; size of existing IT and BPO sectors and IT quality certifications, and quality ratings of management schools and IT training are considered in people-skills and availability. In the foundation of outsourcing – business environment, government support for the ICT sector, investor rating of IP protection and ICT laws, software piracy rates, and information security certifications are examined.
According to the Global Services-Tholons, Bangalore ranks the top outsourcing destination, following by Delhi, Mumbai, Manila, and Dublin. India has been recognized as third generation newly industrialized country from early 1990s for its identity of global leader in outsourcing. India’s ICT services sector has put it onto a global stage and mutually benefits western filtered-down businesses. Apart from the relatively cheaper labor cost, India also has a large English-speaking workforce. Cumulative effect from the early perceived outsourcing destination has brought more and more of the market into the country. Several financial journals depict India as “back office of the world”.
The ICT services sector in Bangalore has grown from low-end to high-end ITO and BPO, its clients include Intel, Microsoft, Siemens, Google and Yahoo.
Even though India owns the leading position in outsourcing, there are events of currency movements, terrorism and corporate scandals that have made it vulnerable and challenged. First of all, India’s economic growth, contributed by its services sector, has also made it more “expensive” than ever for outsourcing investors. Indian rupee has strengthened from 47 per USD in 2006 to 37 per USD in 2007; the across-the-board costs also increased by 30 percent. Even though the normal rate came back in 2008 as many investors moved out, the unstable currency of India has made it possible to be replaced by cheaper locations. Second, the attacks in Mumbai in 2008, which left 164 dead (28 were foreigners) and the continued tension on the India-Pakistan border have increased to risk of investment. Last, there have been events of outsourced firms moving out from India, such as Delta center in 2009. After the large-scale fraud at Satyam, much attention has been paid to Indian corporate governance practices.
To sum up, ICT has played an extremely important role in the growth of outsourcing – it has made the market competitive and surely strengthened the economy of India. However, the growth of outsourcing has negative effect on local tertiary industry sector. I personally believe that the amount of outsourcing should be controlled by governments and NGO to avoid its negative effect on local employment rates as much as possible.