The big boom in offshore outsourcing has kicked off a fierce debate surrounding its practical and ethical implications. Ranging from resulting job loss to low-quality output, the industry has been under attack. However, software offshore outsourcing in India tells a different story through its contribution to the country’s thriving IT ecosystem and speedy economic growth.
Blue collar, white collar
While many of the ethical arguments in the offshore outsourcing debate ring true for manufacturing jobs and blue collar workers, the tertiary sector and white collar jobs are a different kettle of fish. Between 2000 and 2004, America witnessed a 32% drop in the number of students in computer science degree programs while Europe’s high-tech industry remains in continuous decline- only nine of the world’s top 100 ICT companies are headquartered in Europe. A loss of jobs in the host country has been touted as the main negative effect of outsourcing but it is often sluggish supply in the IT sector that prompts companies to shift branches of their operations abroad.
The rising tide that lifts all boats
To cultivate their competitive edge in the global marketplace, companies are increasingly compelled to seek out low-wage areas for parts of their operations. And while financial exploitation of workers is indeed a real and pressing issue, it is important to stress the sector-specific nature of the problem i.e. manufacturing. Low wages is not an absolute concept but a relative one. So despite earning a fraction of his American counterpart, an Indian software developer’s cost of living is low and his purchasing power strong. When it comes to paychecks, bigger numbers aren’t always better.
Moreover, India’s booming IT ecosystem employs millions of developers increasing by the minute and has had a socioeconomic impact of astronomical proportions. 9 per cent of India’s incremental GDP is derived from the IT-BPO industry while the industry directly employs 2.2 million people and indirectly 8 million. This has transformed critical areas such as education, healthcare and employment, all contributing to the significant enhancement of citizens’ lives.
Predominantly considered a cost-saving measure, there has often been an expectation of low-quality output attached to offshore outsourcing. However, in the recent Global Startup Ecosystem Ranking by San Francisco-based Compass, Bangalore was the only city apart from Singapore to feature in the top 20. This ranking is an impressive testimony to the quality of Indian software developers.
Outsourcing software offshore has also provided companies the opportunity to offload tasks with less added value, allowing them to concentrate their resources in more sophisticated areas like architecture and technical management. On top of that, scalability across a wide range of skills helps explain the growing popularity of offshore outsourcing to destinations like Bangalore and Hyderabad.
Although offshore outsourcing has been the source of heated debate on the international stage, the software industry stands beyond the parameters of the discussion. Global supply and demand of software developers demystify the tale of US job losses. And despite providing strong skills at a low cost, Indian software developers enjoy a high a standard of living while the software industry has injected a good portion of adrenalin into the Indian economy. Due to software offshore outsourcing India is no longer the world’s back-office but a country climbing the economic ladder at exceptional speed.