Why does it make more sense to set up an Offshore Development Center in India?

Why does it make more sense to set up an Offshore Development Center in India?

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An ODC is revolutionary: you can get the best recruits from practically anywhere on the planet whilst saving about 70% on expenses incurred with normal hires. There are multiple arguments for why India is the best place to set up your offshore development center. They can be summarized into three words: quality, affordability, and consistency.

5 Reasons Why India Is An ODC Paradise

1. The World Bank Says So

In 2010, the World Bank published a paper that identified India as the best place to set up a dedicated offshore development center. The report went on to state that India was one of only two “mature”-rated ODC hubs on the planet, the other being the Philippines. The term “mature” in this context means that nothing additional is required (on your end) to set up ODCs in India. Vendors in India have mastered the art of setting up ODCs for clients.

The publication was entitled “The offshore services value chain”, and noted that even in times of global economic crisis (Q3 and Q4 of FY-2009), ODCs based in India actually logged a 15% increase in terms of volume. That kind of stability was unheard of during a collapsing market.

Another interesting snippet from this report was that according to estimates by the Boston Consulting Group and the Nasscom-Everest Study, India accounts for about 46% of the global offshoring/outsourcing industry. Possibly the most impressive fact outlined in the report is that IT-sector heavyweights like CapGemini, IBM, and Accenture now employ more offshore employees in India than they do back home in the mainland U.S. If companies with R&D budgets of well over a billion dollars find outsourcing and offshoring to be a highly profitable activity, surely the same will hold true for you?

2. The Global Services Location Index Says So 

The World Bank report of 2010 was reviewed in 2019 by the Kearney Group, which published their findings through the Global Services Location Index. According to them, India is still the best and most profitable place to set up a dedicated ODC. These are the parameters upon which the Kearney Group ranked the countries on their list:

  • Financial Attractiveness (35%)
  • Business Environment (25%)
  • People Skills And Availability (25%)
  • Digital Resonance (15%)

Most notably, the report concluded that India is still the leader in the offshoring global value services chain, with a total of 6 Asian countries being in the top 7. The same report goes on to state that about half of all the global top 500 companies already have ODCs in India across various industries.

The biggest dedicated offshore development centers in India belong to companies from sectors like IT, Design, Engineering, Software, and Marketing. If a country can maintain a lead in such competitive industries for more than a decade, surely it’s the right choice for you. 

3. Half Of All Companies Already Do It

Deloitte, the IT giant, said that approximately 60% of people already outsource to India and a further 22% will do so in the near future. They also made a mini case study of India’s largest offshoring vendors, and published their findings here.

This simply highlights the fact that it is not just small companies that outsource; huge MNCs with massive budgets also do so on the regular — it’s that profitable. (Case in point: CapGemini with 35,000 employees in India).

As the Deloitte survey report outlined: it cannot be a coincidence that over half of these companies chose India as their overseas base.

Furthermore, India’s Ministry of Electronics and Information Technology said, “60% of all firms use India for testing before taking their products global”.

They also published a fact sheet that stated (among other things) that ODCs based in India had saved their clients over $200 billion (from Q1 FY-2016 to Q1 FY-2020).

4. Support, Infrastructure, And Manpower: India Has It All

All things considered, India has the lowest ATOC (average total operating cost) of all popular ODC locations across the globe. Sure, China has cheaper hardware, but their government isn’t too open about labor laws (relevant because the largest group of Chinese ODCs are in the manufacturing sector).

Yes, Ukraine has fantastic infrastructure, but they lack the raw STEM talent that India has. (Ukraine = 150,000 STEM students in total  Vs. India = 78,000,000 STEM graduates). In addition to that, India also has about 500,000 fresh STEM students each year whereas fresher Ukrainian STEM students hover around the 20,000 mark per annum.

And lastly, yes, the E.U. may have the best quality of STEM education worldwide but India doesn’t lag behind. Additionally, hiring from there offers virtually no cost benefits.

On average, corporations pay their U.S. developers a median salary of $76,000 per year. Conversely, when offshoring work, they only have to pay Indian developers $6,700 each year. That means you can hire roughly 23 developers in India for every 2 you would in the U.S according to Indeed and PayScale. India is positioned perfectly at the junction of the following:

  • hardware (tools like computers are readily available), 
  • infrastructure (ready-to-move offices are usually fully furnished), 
  • manpower (should more construction be required), 
  • talent (1 million+ graduates across various industries), and
  • opportunity (severely underexploited market).

Because of this, 7% of all major global outsourcing and offshoring IT contracts are awarded to ODC vendors who operate out of India. Source: MEITY.

5. India Has A Wealth Of (Relevant) Talent

Software development programmers, digital marketers, online researchers, product designers, UXD experts, salesmen, if you can name it, you can find someone to do it in India.

Being the world’s second-largest STEM talent pool, you’ll never be short of recruits over here. Notably, India gives preference to English as opposed to Hindi (the vernacular language), whereas China (the largest STEM graduate pool) endorses Mandarin or Cantonese. It should be noted that population percentage wise, India is the largest STEM talent pool. (40% of Indian students opt for STEM subjects during graduation).

An excerpt from the GSLI report mentioned earlier: “India offers a depth and breadth of English-speaking skilled labor that no other low-cost country can match.” Because English is the closest thing to a universal language that we currently have, your Indian ODC employees are unlikely to have any communication hassles with your various other teams. 

Things To Remember When Setting Up An ODC

Three important things to find out when setting up your ODC (this is pretty much the bare minimum that you should be getting):

Encryption: Because large portions of your ODCs work will be done digitally, confirm data encryption capabilities with your chosen vendor prior to negotiating price. 

Your vendor should be using nothing less than globally accepted encryption standards such as the following: AES, RSA, OpenPGP, SHA2, HMAC, or PBKDF2. 

Data: Vendors will obviously need to collect some data from both you and your ODC team, but this should be kept to a minimum.

Your vendor should be able to explain their data policy to you at the drop of a hat so if they’re avoiding related questions, it’s a major red flag.

Trust: Probably the biggest issue of them all is trust. It’s perfectly natural to be a little suspicious when assigning huge tasks (vital to your workflows) to basically people who are strangers.

To get the most real and relevant feedback, ask to speak to clients (previous and current) of your vendor. Trustworthy vendors will be fairly open to such a suggestion.

That’s A Lot To Process

Choosing a vendor is a complex task and one never knows where to start. Usually something like this is as simple as a Google search but that’s a bit risky these days. With most things having gone virtual, so has fraud. 

If you find it too overwhelming, remember that experts are just a chatbox away at Webential. Drop the team a message to get the setup process rolling or if you have any further questions.

I’ll leave you with a final word of advice: if you’re just starting out, it’s a wise move to follow the beaten trail (or at the very least, consult those who are familiar with it).

Jignesh Patel

Jignesh Patel

linkedin Icon linkedin.com/in/Jignesh Patel

Jignesh is a Tech-Pro who believes in tactical planning and strategizing while promoting technology convergence.

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