| The concept of outsourcing was first given shape by the economist Adam Smith in 1776 in his book The Wealth of Nations. His theory propagated that economies should specialize in producing that commodity or service that the economy had more resources for. Then the theory was applied to "outsourcing" manufacturing services to countries that provide cheap labor. This term has now taken on a totally different connotation: in the face of the IT revolution the term now implies the process of handing over part of its work , like that of designing, implementation of the business process in adherence to a strict set of guidelines and criteria set by the client company. This process is mutually beneficial for the outsourcer and the service provider as it helps the company to cut costs and specialize in other things while providing business to the other.
Although the IT industry in India has existed since the early 1980s outsourcing emerged only in the mid 90s. One of the first services to be outsourced was medical transcription and data processing, billing and customer support too caught on by the late 90s when MNCs had started establishing subsidiaries which served the off-shoring requirements of parent companies. Some the earliest entrants in to the outsourcing scenario were American Express, GE Capital, and British Airways.
The ITES industry in India is still in its nascent stage and is a little more than a half a decade old. In spite of this, the industry has grown enormous growth and has become a key part of the export oriented IT software and services industry.
Inspired, the success of India's IT industry the GoI is trying to attract more FDI in this sector by Establishing Software Technology Parks and Export Processing Zones. Benefits like tax holidays were also extended to this sector. Various state governments have also extended assistance to theses companies by helping them overcome roadblocks they face in recruitment, retention and training their manpower. The National Association of Software and Service Companies (NASSCOM) has eased free flow of information of this industry by conducting surveys and conferences about this industry. The NASSCOM acts as the advisor, consultant and coordinating body for the ITES/BPO industry and acts as the link between central and state government committee and the industry.
NASSCOM postulated the following factors as the key reasons behind India's success in this industry
Abundant, skilled, labor who are fluent in the English language,
Improving telecom and other infrastructure which is in keeping with worldwide standards.
Emphasis on quality among players and their focus on measuring and monitoring quality targets
Fast turnaround times and the ability to offer 24x7 services based on the country's unique geographic location that allows for leveraging time zone differences.
Proactive and positive policy environment which encourages ITES/BPO investments and simplifies rules and procedures.
An agreeable tax structure, which places the ITES/BPO industry on par with IT services companies
Despite being relatively new to the global ITES/BPO industry, the Indian ITES industry recorded a growth rate in excess of 50% in 2002-03. This very fact and the superior rankings and headcount statistics indicate the immense possibilities in store for this industry. According to estimates by the International Data Corporation worldwide the global ITES/BPO industry is worth US$773 billion (as on 2002) and is growing at a rate of 9% CAGR. The following achievements are listed by the NASSCOM as indicating the growth potential of this sector
The ITES-BPO segment is estimated to have achieved a 54 percent growth in revenues as in 2003 -04.
ITES exports accounted for US$ 3.6 billion in revenues, up from US$ 2.5 billion in 2002-03
The ITES-BPO sector has created employment for around 74,400 additional personnel in India during 2003-04
The number of Indians working for this sector jumped to 245,500 by March, 2004.
By the year 2008, the segment is projected to employ over 1.1 million Indians, according to studies conducted by NASSCOM and leading business Intelligence Company, McKinsey & Co. Market research shows that in terms of job creation, the ITES-BPO industry is growing at over 50 percent.
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