Frequently Asked Questions on Offshore Outsourcing (Part 2)

Filed in archive Basics on January 30, 2005

Here are more outsourcing FAQS.

4. Which country is dominating the offshoring market?
India dominates the offshoring market due to the country's established IT companies, favorable wage differentials, and high English proficiency. Notably, India has about 2 million graduates -- 250,000 of which have degrees in engineering and computer science.

Tax incentives are expected to spur growth in the country's business process outsourcing industry. Since 2000, IT companies have enjoyed a ten-year tax holiday that reduced tax rate from 36% to 15%.

5. What is the growth trajectory of offshoring in India?
IT outsourcing in India started in the 1990s when offshore units were set up by companies like American Express, British airways and GE Capital. Independent business process outsourcing vendors followed soon, and recently, IT service companies have launched IT-enabled outsourcing. In the past decade, India has become the leading country for offshore outsouring.

6. What types of operational models exist?
There are three operational outsourcing models namely Captive Processing Centers, Third-party Providers, and Joint Ventures.

Captive processing centers carry out business processing services for their own multinational company. Examples include HSBC, American Express, British Airways, Citibank and Dell.

Third-party providers supply outsourcing services to other companies. This model is similar to Internet software firms that complete IT projects for other companies. Examples are Nipuna, MsourcE, 24/7, Spectramind and Daksh.

Joint ventures are owned by two entities that work together to perform outsourcing services. An example of this is Satyam Computers' joint venture with GE Industrial Systems in 1998.

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