How Long Can Price Advantage Drive India's Outsourcing Boom?

Filed in archive Outsourcing News on March 1, 2005

Analysts are now questioning how long would India's favorable currency differential with the US -- 44 Indian Rupees to 1 US Dollar -- drive the country's outsourcing boom. As India becomes richer (with the Rupees gaining ground against the dollar) analysts ask what effects this would have on the country's outsourcing industry.

According to software management and Appraisal firms, effects of a currency revaluation would be minor on the IT sector, but major on the call center industry.

In the IT sector, even with higher inflation and wages, western companies would still invest to get services outsourced. However this situation would not be a lucrative alternative for western companies in the long run. For call centers, as the Rupees gets stronger, high wages would simply drive call center businesses away.

When the Indian Rupee revaluates, India has to change its image in the international market from a low cost service provider to a strategic quality service provider. For the IT sector, this image change has to happen immediately or else the country's outsourcing industry will suffer.